Time Off, Part 1: Traditional Days vs. PTO

With the New Year here, it may be the perfect time for your company to rethink its time off policy. The traditional time off structure for employees is comprised of separate days off for vacation time and sick time. The more modern approach to time off is a bank of days called paid time off (PTO), which combines all time off days into one set number to be used for whatever the employee chooses. It is important to look at several different factors when choosing which arrangement works best for your company. Many companies are moving toward PTO for a variety of reasons ranging from ease of management to reducing unscheduled time off to incentive for new hires.

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The traditional time off plan can be cumbersome and hard to manage. At a time when businesses are looking to streamline operations for economic reasons, PTO is a way to take the bulk of managing time off and put it into the employee’s hands. This relieves the human resource department from policing employees and managing multiple types of days for each employee. There is no longer a need for management to ensure that sick days are truly being used for ill employees. Also, employees must manage their own days off by planning ahead and thinking about saving days in case of illness.

Also important to employers is the number of total days that their workers are permitted per year. Often the traditional route provides for more time off than PTO. The average days off after one year of employment for vacation are ten and for sick days are eight. The average total days off after one year of employment for those with PTO are 15. Therefore, with PTO, employers are paying out for fewer days out of the office. Three days does not seem like much until it is multiplied by the number of employees in the company. In a small company with 10 employees, that is approximately a month of time off being paid out.

High employee morale is important to ensure a positive work environment and company productivity. Employees often complain when a peer seems to be abusing the company’s time off policy. PTO takes away the possibility of misusing the system. A day off is a day off. It does not matter whether the employee is sick, volunteering, or on vacation. The way they use their PTO is completely up to them. Workers often feel that PTO “levels the playing field,” especially those that feel cheated because they never use their sick time while others use all of their sick and vacation time. Studies show that 72% of companies that use PTO state that it has been good for morale. Employees also report that they find PTO to be helpful in balancing home and work. They do not have to justify taking time for a “mental health day” or going on a field trip with their child’s class.

Though it seems that PTO is much easier on all fronts than traditional leave, there are several things that must be taken into consideration. It must be decided if the time will be accrued or given up front, if it will roll over at the end of the year (fiscal or anniversary), what the policy will be for unpaid time off, and how emergencies will be handled. Abuse is possible. Employees that continually “call in,” show up late, or attempt to work when sick are all problematic. Setting policy for all of these situations is the key to having a healthy PTO system. Also important is determining what the time frame for requesting time off will be and how the requests will be handled.

While there are no laws about paid time off, it is essential to lay out exactly what the policy will be. It should be included in the employee hand book and it is important to have employees sign off that they understand any changes to the current system and will abide by the rules.

There will be two more posts in this series. The first will explore sick time donations and floating paid holidays. The second will delve into plans that offer extended time off. Come back to learn more about the trends in paid time off.

Sources:

Fegley Shawn, et al. (April 2009). Examining Paid Leave in the Workplace.

SHRM.

Retrieved December 20, 2012.

https://www.shrm.org/research/surveyfindings/articles/documents/09-0228_paid_leave_sr_fnl.pdf

Paid Time Off Programs and Practices. (May 2010).

WorldatWork.

Retrieved December 20, 2012.

https://www.worldatwork.org/waw/adimLink?id=38913

United States Department of Labor.

(March 2009). Employee Benefits Survey.

Bureau of Labor Statistics.

Retrieved December 20, 2012.

https://www.bls.gov/ncs/ebs/benefits/2009/benefits_leave.htm