As we’ve discussed in previous articles, there are plenty of good reasons to offer generous benefits, including the fact that they help attract top-tier candidates, increase employee morale, and reduce turnover. The paid time off (PTO) your company offers is a crucial component of those benefits. Time away from the office is necessary for employees to recharge their batteries and return refreshed and reinvigorated for work.
What Is PTO?
Traditionally, employees were given separate allocations of vacation time, sick time, etc. Today, human resource managers are noting a shift toward aggregating these “time off” benefits into general PTO.
According to the Society of Human Resource Management, “A PTO program replaces traditionally distinct programs—vacation, sick days, personal days, salary continuation programs, etc.—with a single block of time that employees may use for any purpose.”
For employees, PTO plans make it easier to take time off and cut down on the inappropriate use of sick days. For employers, a PTO accrual plan makes it easier to plan and reduces the organization’s costs. However, with combined PTO, you must keep in mind that accrued, unused time would be viewed as “wages” and would be subject to payout upon termination (Massachusetts employers, keep that in mind).
PTO Accrual Basics
PTO accrual can be calculated in different ways depending on your organization’s HR strategy.
- An allotment of PTO (a set amount of days per calendar year). For example, if an employee is allotted 10 days of PTO per year, they receive that time at the beginning of the calendar year to use immediately and won’t receive any additional time until the beginning of the next year.
- An accrual of PTO throughout the year (earned increments of time throughout pay periods). There are two types:
- Accrual per pay period
- Accrual per hour worked
For example, full-time employees work 40 hours per week and accrue 40 hours per year, which works out to an accrual of .7692 hours of PTO per week. They may use those hours as they accrue. After they have worked 52 weeks (1 year), they will have accrued 40 hours.
Important PTO Accrual Questions To Consider
- Will your organization allow PTO accrued or allotted to be rolled over to the next year (up to a certain time period)?
- Will your organization offer “use it or lose it” PTO accrual—meaning if employees don’t use their PTO within the calendar year, will they lose it?
- Will your employees need to observe a waiting period before they get PTO?
How To Implement PTO Accrual Policies (Plus A Free PTO Template)
Although you are not required by law to compensate employees when they are not at work (except in the case of sick leave, which is required in some states), if you decide to offer this benefit, you should be prepared to do so in a fair and consistent manner and you should document your policy in writing.
So, how do you determine which types of paid time off (PTO) you should offer?
In the PTO template, we’ll give you actionable steps you can use to answer your questions about PTO and provide a template you can use to create consistent PTO policies across your organization.
Download it for free right now!
