PTO vs. Vacation

Taking a sick day or requesting vacation is a thing of the past for many companies. In recent years, many companies are experimenting with paid time off (PTO) as opposed to the traditional vacation, sick and holiday benefits packages.

How does PTO work?

Unlike traditional benefits, PTO is a bank of hours that employees can draw from for a number of reasons, including taking a vacation, taking care of a sick child, going to a doctor’s appointment or needing a personal day off from work. Employers either credit the employee’s bank every pay period with a specified amount of time they can use, or credit the year’s worth of days at the start of the year. For instance, where traditionally an employer might offer 30 total paid days of itemized for specific purposes (10 paid holidays, two weeks of vacation, two personal days and eight sick leave days), they might instead offer the employee 30 total days available for the employee to use at his or her own discretion.

There are two ways to distribute PTO days. Some employers credit the full annual number of days to the employee’s account on Jan. 1. Others prefer the days to accrue throughout the year and deposit days each pay period. Using the example above, if an employer pays bi-weekly, the employee would accrue 1.3 days every two weeks. Or, if the employer pays semi-monthly, the employee would accrue 1.25 days at each pay period.

PTO plans generally work best in an environment that is already flexible in nature and is open to modified work schedules, as PTO plans promote a work-life balance by allowing employees to determine when they should take time off, and what they should use it for.

Advantages and disadvantages of PTO programs

Depending on an employer’s specific employee population, PTO may or may not be the right fit for their organization. We’ve outlined a few of the advantages and disadvantages that come with implementing a PTO policy.

Things to consider before implementing a PTO plan

If your company is considering implementing a PTO plan, there are several considerations to take into account:

• First and most importantly, make sure this benefit option fits with your company environment and culture. If you are not open to flexible work schedules such as flex-time or flex-place arrangements, PTO plans may not be a good option.
• Establish clear directives for your employees before implementing the plan. For instance, you may require employees to give at least a three-day notice before using a PTO day unless he/she is sick or there is an emergency.
• Define what an emergency situation is, and stick to that definition. Does a sick child or a flat tire count as an emergency? What about a hangover? Or waking up on the wrong side of the bed? If the policy is straightforward and clearly outlined, employees will not feel apt to take advantage of this newfound freedom.
• Decide what your policy will be regarding employees coming into work sick. Just because the employee has control of when and why they take off work does not mean that you are not able to manage them while they are at work. Therefore, if they come in sick because they do not want to use PTO days, you can simply send sick employees home. Those days are designed for fun times as well as illness, so they should be used as such.
• Ensure that your current time and attendance system can handle your PTO program. Not every technology platform is capable of handling a complex policy, and may result in added expense and delays if the incompatibility is discovered later in the implementation process.

Specific questions employers will need to answer prior to designing a PTO program

The following factors are ones that should be considered when designing a PTO plan:

• What types of absences will you include in the PTO bank?
• How many PTO days will be available to employees? Will those days be determined by job level, seniority or another factor?
• Will PTO replace all types of paid absences or will you retain separate policies for typically unanticipated leaves, like bereavement or jury duty?
• Will any of the PTO days be eligible to carry-over to the following year? If not, must the account be paid out at the end of the year?
• How is payment calculated for unused PTO days? Will the employee get 100 percent of the cash value or a lesser percentage?
• If the employee leaves the company, will the individual receive the value of their PTO account? Or will it only be paid out when the employee voluntarily resigns or retires?
• How will the program be administered and coordinated with payroll?
• How often will the program be reviewed, and by whom?

All in all, PTO is a viable option that works well for many companies and can be a beneficial alternative to traditional vacation and sick time off. So while PTO may not be right for every organization, it may be just the solution your business is looking for.

Ready to make the switch, but need a little guidance? G&A Partners can help. As a leading provider of outsourced human resources services, G&A’s team of experienced HR professionals are experts in designing and implementing effective employment policies, including PTO and other leave arrangements. Combine the expertise of our team with the scalability of our easy-to-use time and attendance platform, and you can see why our clients say we’re the perfect partner for their growing business. Call 1-866-634-6713 or schedule a free consultation with one of our business advisors today!