What should be included in a PTO policy?
A paid time-off policy is a combination of days off that an employee can take while still getting paid. Each state has its own restrictions and requirements for PTO policies. A PTO policy should include paid and unpaid leave options, accrual and rollover details, PTO request procedures, and consequences for violation.
What does PTO policy mean?
Paid time off (PTO) is an employer-provided benefit that grants employees compensation for personal time off, vacation days, federal holidays, sick leave, and maternity and paternity leave. Paid time off policies are not a requirement of the Fair Labor Standards Act (FLSA).
How do I create a PTO policy?
Calculating PTO by pay period.
One metric that employers can follow to calculate PTO is to divide the annual PTO hours by annual work hours. For example, if an hourly employee earns 80 hours of PTO each year and works 40 hours a week, or 2,080 hours per year, divide 80 by 2,080.
According to SHRM, PTO accrual by pay period is the most common accrual rate with 37% of companies using this rate. Employees start accruing PTO upon their date of hire, but they still must wait a year until they're able to access all of it.
A paid time off (PTO) policy combines vacation, sick time, and personal time into a single bank of days for employees to use when they take paid time off from work. When an employee needs to take time off from work, the PTO policy enables a certain amount of the time off to be paid hours.
Divide your annual hours by 12 or 24
For example, if you receive 15 days off per year, you will accrue a total of 120 hours of PTO during the course of a year. If you are paid twice per month, you will divide 120 by 24, which equals five. That means you accumulate five hours of PTO in each pay period.
Unlimited PTO is a vacation policy that allows employees to take as much free time as they want as long as it does not interfere with their ability to complete their work. The policy simply avoids putting a hard cap on the amount of time the employee can take in a given year.
The average paid vacation days per year for employees who have been with a business for 1-5 years is 10 days. Employees who have been with a business for 5-10 years receive an average of 15 days for vacation. The average number of vacation days employees who have worked at a business between 10-20 years receive is 17.
As has been covered, for most situations, no federal laws exist that require employers to offer paid time off. However, some states may have PTO laws of their own that apply to companies within that state's borders.
The terms PTO and vacation often are used interchangeably by employees, but they're not actually the same thing. PTO is considered to be any time an employee is getting paid while away from work—it's more all-encompassing than “vacation.” Think of it like this: all vacation is PTO while not all PTO is vacation.