How to Select a Paid Time Off Policy That is Right for Your Business

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It’s almost impossible to expect someone to work for a full year without time off. People need time to relax, heal, and ultimately take their minds off the job. If you are hiring full-time employees, this means that you will eventually need some kind of policy about how people get paid when they are not at work. This type of policy, referred to as paid time off or PTO, is one of the most important benefits that a company can offer. If you want your business to succeed, you will need to figure out how to select a paid time off policy.

How to select a paid time off policy

As you grow your business, you’ll need to look at various paid time off policies. It’s not as simple as just letting your employees know they can have a certain number of days off per year – this is a very important benefit and one that can make the difference between finding the best employees and having to continually search for replacements. Before you make a decision on the type of PTO you will give your employees, you must understand what PTO is, the different types of PTO out there, and how to select a paid time off policy.


how to select a paid time off policy


What is PTO?

PTO, or paid time off, is a system under which employees are paid for time they are not at work. This is typically a benefit offered to full-time workers, though an increasing number of businesses also allow part-time workers paid time off. It’s important to note that PTO is often something that is accrued over time – employees typically gain a fractional amount of PTO for every hour or day worked. Over time, employees gain days off that they can use for various reasons, ranging from going on family vacations to taking personal days. PTO is a valuable benefit for most employees and most prospective hires will look into a company’s PTO policy before applying for a job.


Types of PTO

There are several different types of PTO. Each of them has its own requirements and benefits. Some of the policies require more work on the part of an HR department than others, but all of these policies do allow employees to get paid while they are out for various reasons. Choosing which one is right requires understanding a bit about the different types of PTO that companies currently use and how they can be implemented in your workplace.


how to select a paid time off policy


Combined PTO

Combined PTO is also known as banked paid time off. This is time off that an employee can accrue during the working year and use for various reasons. In most cases, combined PTO takes the place of sick leave, vacation time, and even bereavement to allow employees to use their time as they see fit. This can be beneficial for administrative reasons (and to take some pressure off of office managers, but it does tend to become problematic when employees bank their time off instead of taking it for its intended reasons.


Sick Leave

Sick leave is specifically paid time off of work that an employer gives to sick employees as a benefit. Sick leave isn’t quite the same as PTO, as it is given for a specific reason and the company may require a note from a doctor in order for the employee to receive pay for that time. While used interchangeably, failure to have a solid sick leave policy can lead to employees banking PTO time and coming into work while they are sick.


Vacation Time

While vacation and PTO are usually used interchangeably, vacation is a very specific type of paid time off. When an employee takes vacation time, they do so at their own discretion and for whatever reason they like. The company cannot put any limits on why the employee chooses to take this time off or how he or she spends this kind of time. When an employee has a paid vacation, they will continue to be paid regardless of why they have chosen to take that time off.


how to select a paid time off policy



Bereavement leave is typically a type of paid or unpaid leave offered to employees when there is a death in the family. While this can often be part of a combined PTO policy, it is also often seen as a separate type of leave. Because these situations typically come up so rarely, many companies fail to update their bereavement policies and find themselves handling this type of leave on a case-by-case basis. Good bereavement policies set up an outline for how much time an employee can take off while being paid, and under what circumstance bereavement pay will kick in.


What is unlimited PTO?

Unlimited PTO, as you might imagine, is incredibly rare. In fact, only about one percent of all businesses offered unlimited PTO. Under this type of scheme, employees are able to take time off whenever they like and for whatever reason they like – so long as they are able to stay on top of their work. This type of PTO requires a strong work culture and an employee base that won’t abuse the policy. It is quite helpful for taking some of the burden off of a growing Human Resources Department as well.

When you have an unlimited PTO policy, you never have to worry about employees rushing to cash in banked time or dealing with paying out the remainder of an employee’s PTO when he or she is let go. Unfortunately, this type of policy just isn’t realistic for some workplaces. If your office requires attendance to complete job functions, this type of policy can actually be quite harmful. Instead, it’s more useful to have this type of policy in place at a business where work is done by the project rather than by the hour. Unlimited PTO can work, but only when the atmosphere is perfect.

No matter what type of PTO you choose, you will eventually have to make a choice. You won’t have to do it all on your own, though. Working with a professional organization is often the best way to make sure your PTO program works well and that that it is properly administered. If you need help with time off accrual tracking, benefit reporting, or customized payroll solutions, why not Ask Sally at PayTech? Get in touch today to start figuring out the best way to give your employees the time off that they deserve.


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