How Does Paid Time Off Work? Best Practices for PTO

How Does Paid Time Off Work?
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Ah, the glorious acronym “PTO.” Those three letters are one of the most beautiful sounds to any hard-working employee looking forward to some much-needed time off.

Of course, most people know that PTO stands for paid time off—but how does paid time off work, exactly? Whether you’re creating a PTO policy for your small business or an employee seeking to understand your PTO, we’re here to break down how PTO works, the types of PTO, and more. 

How PTO Works

Most employers offer PTO as a net term to include all of the reasons an employee may need or want to take time off of work. This paid time off is usually added to a general PTO bank to include vacation days, sick days, and more. Rather than receiving a set amount of PTO days at the beginning of every year, an employee usually accrues these PTO hours over each pay period. 

Types of PTO

There are many types of PTO a company might offer its employees. In fact, companies are offering increasingly diverse and generous types of PTO in order to attract the top talent in their industry. Here are a few of the most common forms of PTO for the American workforce.

1. Vacation Days

Vacation days are usually what people most commonly associate with PTO. This is the time employees get to take off to travel with family, take a summer trip, or extend their holiday vacation.

2. Sick Days

Inevitably, there comes a time in the year when an employee falls sick with a cold or flu bug. When a person takes time off work for this type of short-term illness, it’s known as taking a “sick day.” (Long-term sickness usually calls for medical leave or disability benefits.)

3. Personal Time

Sometimes employees simply need time off to relax or take care of personal matters. This might require travel to another city or state, or it might mean the employee sticks close to home. In any case, this type of PTO falls under the category of “personal time.”

4. Holidays

At some companies, time off for holidays is a given: The whole staff takes the day off, and no one is required to formally request PTO. But for essential workers in the medical field, retail, and grocery stores, holidays may be something they need to request time off for in advance.

5. Family Emergencies

PTO for family emergencies is an important part of helping employees feel supported in a time of need. Employees might use this type of PTO when a family member dies, falls ill, or is in crisis.

Types of PTO Policies

Though PTO banks are some of the most popular types of PTO policies today, a company might also offer traditional time off, or even unlimited PTO. Here’s how each type of PTO policy works.

1. Traditional Time Off

With a traditional time-off policy, employees are given a set amount of paid time off for designated categories, such as 10 days for vacation and 3 sick days per year. This PTO might be given at the beginning of the year, or at the beginning of the month the employee first came to work for the company. Time off may increase the longer the employee stays with the company.

2. PTO Banks

PTO banks share many commonalities with traditional time off, but all of the types of PTO are put together in one group, rather than being separated by a number of sick days or vacation days. Employees usually accrue PTO hours over time and get more PTO hours over the years of working for the company.

3. Unlimited PTO

Unlimited PTO is a relatively new trend that is especially appealing to the younger workforce. Most companies who choose this type of policy don’t require employees to track their days off, but they still need to get approval from their manager in advance. Offering unlimited PTO shows that the executives trust employees to use their time wisely, and cuts back on administrative work for HR.

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