What is PTO? A Definitive Guide

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What is PTO? A Definitive Guide

We have been stuck in our homes for so long that a good vacation or a time off is the only thing in our minds right now. Working from home is not the same as taking a vacation and enjoying every bit of the moment. Due to the pandemic, we are left wondering when would we be able to take a vacation.

However, it’s not only the fancy vacations we are thinking of. Due to the COVID-19 pandemic, individuals across the globe are self-quarantined or observing lockdowns in their areas. Those who have to take care of their loved ones or have to recover themselves from the novel coronavirus are considering paid time-off or PTO across industries and businesses of all sizes.

Paid time-off is universally regarded as an important employee benefit. However, the US lags behind some of the developed countries in terms of employee benefits, especially the paid-time-off. The attitudes towards PTO are non-serious, to start with.

US is the only developed and economically stable country in the world without mandatory federal law concerning PTO. However, 76% of the private sector employees do get paid time-offs.

When looking for a job or negotiating current post terms with your employer, you must understand all aspects of workplace benefits, including PTO.

Paid time-off is the key to keep yourself fresh at your workplace. It is key to making a productive and healthy workplace for your employees.

A 2018 study found that employees who take paid time-offs are productive, produce high-quality work, and happier to do overtime even. From what we have determined from the data, job seekers look at PTOs as one of the best workplace benefits.

Like many company-sponsored benefits, paid time-off can sometimes be confusing for an employee to understand. Many employees ending up searching, ‘what is PTO’ and get the wrong information. If reading the PTO policy of your workplace is not enough, here’s a guide to help you out!

What is paid time-off?

PTO- short for paid time-off refers to any paid leave program of a workplace. It refers to the time that the employees are paid for when they are not working. PTO might also include sick time, holidays, vacations, and personal time.

Most of the leading companies bundle the sick time, personal days, holidays, and vacations into one paid-time-off package. The employees of the firms are allowed to use this time however they desire to.

However, there are companies that treat paid-time-off, sick time and holidays separately. Today, more and more companies are offering an ‘unlimited PTO offer’ to their employees. In these packages, the employees do not have to inform the PTO days beforehand. But there are certain conditions for them. For instance, fresh employees might not get this package but a senior employee can avail it.

What are the types of PTO?

Companies generally offer various types of PTOs. When negotiating workplace benefits, know the type of PTOs that your employer provides. It is better to ask paid-time-off meaning before joining the company you deployed. Ask about the number of paid days off, the average PTO, etc.

The average PTO, or the average paid time off increases as your tenure increase. Some companies even offer long PTOs to encourage employee loyalty and productivity.

Here are various types of PTO that you should know before inquiring from your employer:

Set number of paid time-off days

Many employees are allotted a set number of days as PTOs annually. In many countries, fresh employees are not eligible for PTOs. Whenever the employees are on probation or are freshly hired, they only get off on public holidays. Your employee benefits increase with tenure.

For instance, you might be allowed to take 10 days off work but you would not be allowed to take it in the first 90 days of your job.

While some companies give employee benefits right away, to encourage employee loyalty, some reward their employees with benefits after the probation period.

Accrued time-off

Accrued time-off refers to the employees accumulating a certain number of paid time-offs. To calculate the number of PTOs you will receive, simply add the number of days off in each period till the day you desire to work.

For instance, if you work 8-hours a day and receive 15 paid days off per year, you will receive 120 hours of pay per year. In addition to that, divide this number by 52- the number of weeks each year. This is the number of PTO time you will accumulate each week.

Rollover allowances

Typically, some companies allow their employees to roll over their PTOs to the next year. For instance, if you use only 5 days from your 20-day PTO time, the remaining 15 days will accumulate to your next year’s PTO time.

However, some employers have accrued time-off limits on this scheme. Other companies use the ‘use it or lose it’ policy, in which an employee has to use the PTO or else, they would lose it.

PTO based on your years of experience

Companies often will allocate more PTO the longer you stay with the organization. For example, for the first year the employee will be given 10 days PTO and the second year he or she may get 13 days and so on. The method of PTO will encourage your employee to stick around for longer.

 

How does PTO work?

PTO programs vary from company to company. Traditional leave policies observed in the US grant 10 paid holidays, 8 sick days, 2 personal leaves, and 10 days of paid vacation- totaling the paid day-offs to 30.

According to SHRM (Society of Resource Management Paid Leave Benchmark Report 2019), most of the companies only grant 20 paid leaves to the employees excluding public and company-observed holidays.

Depending on the employee’s tenure, he might also be able to earn additional Paid time offs. In addition to that, he can also roll over the PTOs, or accrue PTO at specific company increments.

How to track PTO

The HR department has to do a lot of work when it comes to calculating employee vacation tracking, the average paid time off, employee time-off tracking, time limits, caps, accrual rates and managing payroll hours calculator.

Even with a company-set PTO policy and bundled packages, the HR department will need help and external support.

Selecting a time-off tracker or an employee vacation tracker with robust features, PTO template excel, various PTO spreadsheet template layouts, and timesheet templates can support the people at the center of your business. The smart reporting capabilities of time-off tracking software can lift the burden off the HR department. This is where a tool like ClockIt can come in. ClockIt supports automated accruals and PTO calculations. ClockIt supports weekly, every two weeks, annually and monthly accruals along with automatic rollover rules, probation, adjustments and many more.

Accessible from your computer or your mobile device, the viable PTO tracker solution makes it easy for supervisors and the HR department to manage PTOs, payroll hours, and paid days off easily on the go.

Using excel PTO tracker templates, the free vacation tracking software can easily sync PTO Changes and hours with payroll in real-time.

The smart PTO solutions can help the HR department to avoid manual time-off tracking errors and fragmented employee off-time tracking. ClockIt PTO software helps the supervisors to focus on what matters- building productive, happier and engaged workforces at the workplace.

keeping up with the company’s compliance is difficult, especially when you have to manage different rules across multiple jurisdictions.

Employee vacation tracking software helps the employees to handle paid leaves and PTOs with pre-configured PTO policies and fully compliant layouts designed to meet the company’s specific requirements and regulations.

With paid time-off tracking, the HR department can easily look into various types of PTO leaves including parental leave, sick leave, personal days offs. One advantage of using a vacation time tracker is to stay compliant with federally associated FMLA guidelines.

Benefits of a PTO Policy

With 41% of employers offering a PTO policy and 52% of employers sticking to traditional leave policy, there are pros and cons of each.

Here are some benefits of creating and adhering to a PTO policy:

Flexibility

PTO gives employees the autonomy and flexibility to take rest whenever they please. The productivity factor increases when workers feel empowered to take their well-deserved PTOs without having to ask for permission from the employer.

In the past, most of the employees were untruthful when they needed the time off. As a result, the employee’s loyalty decreased with time. PTO or paid time offs eliminates the need for employees to explain themselves for the vacations they are going to take.

Granting employees, the autonomy to use their off time whenever they please to builds mutual trust and understanding between them and the employer.

Lift the burden off the HR department

Regardless of how small the business is, the HR team is always busy. The HR team is responsible for hiring, recruiting, handling business/employees’ relations, and keeping with up compliances. In simpler words, they are administrating everything- from A to Z.

Even with a robust, free vacation tracking software, off-time tracking can be time-consuming. The HR team gets confused about whether the employee was on personal leave or sick leave.

Reduce absenteeism

It is common for employees to take ‘sick leave’ on Mondays. Because the sick leave cannot be approved in advance, the absenteeism increases. According to Alexander Hamilton Institute, 54% of the corporations observed a 10% reduction in absenteeism by applying PTO Policies and adhering to the paid day off policies.

PTO Laws and Compliance

The laws governing PTO policies and programs vary from state to state. As per federal law, employers don’t need to provide paid leaves. However, they are bound to provide unpaid leaves for specific instances to stay compliant with FMLA guidelines.

States have a different story to tell when it comes to paid time-offs. While several employers are required to pay only paid leaves, other employers are bound to pay paid holidays, vacations, personal and sick leaves as well.

If your company works under an umbrella PTO policy, you are not bound to provide additional paid sick leaves as the lump sum amount of PTO days can be used instead of that.

HR teams can easily find relevant information and state-specific PTO laws by searching for paid leave and employment leave by state. However, if you want to curate a law-specific PTO policy, it is best to consult an employment lawyer.

PTO FAQs

While many people are familiar with PTO programs, some employees and employers are still struggling to understand how PTO works.

Here are some frequently asked questions on PTO, how it works, its benefits, etc.

What does PTO mean?

It is short for paid time-off- referring to an employee’s benefit that allows him to take a certain number of paid days off. PTO is a bundled package that includes paid sick leave, personal off days, paid holidays and paid vacations.

How much PTO is average?

According to the Bureau of Labor Statistics, 10 days is the average number of PTO for private-sector employees who have completed one or more years of service. However, the PTO increases with your tenure in the company.

According to a survey, the average PTO days in the US are 11, annually for each employee.

How much PTO is normal?

10 days for PTO is the average for a private-sector employee who has completed one year of service.

Does PTO count towards overtime?

No, the employers do not have to count sick paid leave, paid personal leave, paid holidays, and paid vacations towards the overtime calculation. Technically, these hours cannot be considered as overtime hours because they have not been worked.

What are the disadvantages of a PTO policy?

  • Some employees will hoard/accumulate sick leave
  • As an employer, you might end up paying more for paid leave
  • PTO often means a smaller number of leave days at some workplaces

How is PTO different from the paid leave policy?

Paid leave policies refer to traditional leave policies where employers have to differentiate between vacation leave, holiday leave, sick leave and personal leave. PTO is a single-pool employees’ benefit that they can use however they please.

Closing thoughts

Every business must come up with a PTO policy with specific considerations. While paid leave policies are used to understand why employees want to take off, PTO is a single-pool paid leave program for employees in which they do not have to explain themselves.

In our opinion, it is necessary to curate a flexible PTO policy as it builds a productive workforce.

Basil Abbas
basil@tecsolsoftware.com

Basil is the Founder and CTO at ClockIt. With over 8 years of experience in the products space, there is no challenge that is too big in front of him be it sales, marketing, coding, etc. A people person and loves working in a startup for perfection.

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