PTO (Paid Time Off)

What is PTO?

PTO or Paid Time Off is a type of earned paid leave policy that doesn’t categorize the reason for the leave. Traditional paid leave separates the type of leave by category. The categories include sick leave, personal leave, and vacation leave.

For most companies, the PTO model provides each employee the same number of paid days away from work throughout the year. Employees accrue leave as they work their regular schedule. Some employers increase the amount of PTO each year the employee stays with the company..

With PTO, the employee decides when they need a day off and does not need to give a reason for taking the time off. The employee can use the leave whether they are sick in bed or headed to the lake to go fishing. Some employers believe using undesignated PTO instead of categorized leave reduces sick leave abuse.

Employers and managers may still regulate the way employees use PTO. For example, they can require advance notice and/or manager approval. Of course, in the case of a sudden illness, an employee would not be able to give advance notice.

Why offer PTO as an employee benefit?

  • Employees rank paid vacation as their second most-valued benefit after health insurance.
  • Employees who believe their organization encourages vacation report higher job satisfaction.
  • Companies that don’t have an absence management plan are losing an average of $775 per employee, per year.
  • PTO is critical during times of workplace disruption.
  • Generous PTO can increase employee satisfaction and engagement. Engaged employees avoid unnecessary absences, and work to make the business successful.

How can employers manage PTO?

Employers or HR directors can use the following step-by-step process to manage PTO:

  1. Create and document a PTO policy in the employee handbook
  2. Train managers and employees on the PTO approval system
  3. Track employee time with employee timekeeping software
  4. Calculate employee balances with PTO tracker software
  5. Allow for year-end rollover if applicable
  6. Adjust for tenure if applicable
  7. Answer employee questions about their PTO
  8. Notify employees of soon-to-expire earned leave
  9. Understand how Family Medical Leave Act (FMLA) and Emergency Paid Sick Leave Act (EPSLA) affects PTO and track all types correctly

What is the average PTO provided by employers in the US?

The average PTO benefit is ten (10) paid days off after one year of employment.

Does the Fair Labor Standards Act (FLSA) require employers to provide PTO to their employees?

No. The FLSA does not require employers to provide paid leave. The Family and Medical Leave Act (FMLA) however, requires employers to provide unpaid qualified leave as specified by the Act.

Do state laws affect PTO?

Some states consider PTO an employee benefit. As such, if an employee with unused PTO quits, the employer is required to compensate the employee for the earned, unused PTO. In 2020, at least 16 states had a law that requires employers compensate former employees for unused PTO upon termination.

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