Do you think about creating a paid time off policy at your company? This guide will help you start the process with more confidence: you’ll learn about different types of PTO and get a recipe for tracking your team’s days off efficiently. 

First things first – it’s important to note that not all businesses have a PTO policy. It isn’t necessarily a sign of not caring about the employees. After all, in many countries, a certain amount of paid time off is guaranteed by the law. Still, a PTO policy could be a great employee benefit and a competitive advantage of a given workplace, which is why many organizations decide to offer different time off policies to their team members. 

The PTO, as such, seems to be extremely popular among employees, especially in the USA, where the federal law doesn’t guarantee paid vacation days. In a recent ranking of favorite benefits, PTO came in second just behind the healthcare coverage. 

Workplace happiness should be a priority of any executive who wants to lead a healthy and productive team. Creating a paid time off policy, however, is also beneficial to the company itself. It helps to prevent unscheduled absences and maintain workplace transparency. With that mind, you need to decide what kind of PTO policy do you want to introduce in your organization. Let’s start by explaining the term itself.

What is a Paid Time Off (PTO) Policy?

PTO Policy (or simply PTO) outlines the rules according to which employees can use a certain amount of time off. There are different types of PTO strategies. Some companies choose to offer a fixed number of paid hours per year/month that could be used for any purpose. Other businesses bundle these hours into categories: vacation time, sick time, personal time off, etc. 

There’s also the so-called PTO Accrued, which means that, as time goes by, employees become entitled to more time off (as opposed to getting the whole allowance e.g., at the beginning of the year). Yet another type of time off policy is to offer unlimited PTO. In the next sections of this article, we’ll go through the popular kinds of PTO and discuss their advantages and drawbacks. 

Fixed PTO

It’s a traditional kind of paid time off policy: a company would offer a number of days off grouped into different categories (e.g., vacation time or sick days). One of the benefits of this approach is that businesses can forecast the number of absences and, thus, better allocate resources and plan recruitment efforts. 

The downside of fixed PTO policy is that employees might not be happy about the fact that time off is divided into fixed categories. They would rather, for example, use more days for vacation purposes instead of having it stashed as potential sick time that they don’t end up using.  

Yet another disadvantage of fixed PTO used to be the fact that tracking absences within different categories was quite cumbersome. Fortunately, resource management apps have solved this challenge by offering automated absence trackers. Read more about that in the last section of this article. 

Flexible PTO

There are several types of PTO policies that could be described as flexible. First, you have the “unlimited vacation days” system according to which employees are eligible for as many days off per year as needed. Then, you also have PTO strategies where the number of paid absences is fixed, but workers can use them up for whatever reason (banked PTO). 

PTO Banks

This approach benefits employees who enjoy the additional freedom, but it’s also advantageous for the companies that are still able to forecast absences (the maximum number of paid days off is provided within the policy). The time off allowance can be available in total from the beginning of the year, accrued each month, or even calculated continuously, based on the number of hours worked. 

Another aspect of designing PTO plans that you need to consider is what happens with unused days from the allowance. Do they carry over to the next year? Do you plan to reimburse employees for remaining vacation time? Make sure you take legal regulations into account: depending on where you operate in, the payout may be mandatory.

Unlimited PTO

Unlimited PTO is one of the most talked-about employee benefits in recent years. Not limiting the number of vacation days employees take, seems to be a substantial leap of faith on behalf of the employer. On the other hand, however, it may turn out that, with unlimited PTO in place, employees end up taking fewer vacation days.  What is more, some team members see it as a publicity stunt or a recruitment marketing tactic. How to prevent that? 

The policy of unlimited paid vacations requires at least as much planning and internal communication as policies with seemingly much more regulations involved. Your employees have to know what to expect: What is the minimum amount of yearly time off? How early should they inform their managers about a planned absence? What are the rules when it comes to sick leaves and personal days? 

Even though this policy is all about giving your team the power to choose when they take their PTO, you’re still responsible for providing them with some guidelines. Otherwise, they may be wary of the new rules. However, if you’re successful in introducing the new unlimited PTO policy, you’re likely to increase employee engagement, strengthen their commitment, and build trust between you and your team.

Time off tracking

Whether you opt for fixed or flexible PTO policies, you will probably look for an efficient absence tracking process. It’s relatively simple if you’re offering a single allowance of days off and gets increasingly difficult when you have separate time off categories or policy of accrued PTO. Tracking paid and unpaid time off may become a significant administrative burden unless you decide to make use of automated solutions. 

The most feasible way of tracking time off is to utilize a tool that makes necessary calculations for you. Not only is that a huge time saver, but also a single source of truth accessible to both employees and your HR team. 

Teamdeck allows you to create a time off report for your employees. You can summarize people’s time off based on different categories (sick leave, personal time off, vacation etc.). The PTO allowance can be set by you or calculated by our app, based on, for instance, the number of hours a given person has worked for. 

We recommend such a data-driven approach because it allows businesses to uncover valuable insights without having to analyze heaps of data by hand. Sign up today to see how easy it is to build a time off tracker using Teamdeck’s reporting suite. 

Teamdeck comes with features designed to manage employees’ time off requests. Everything happens inside the app, so your leave management process is lean and straightforward. 

Do you have an idea of the PTO policy your company should have, but you’re not sure how to best track your team’s days off? Schedule a call with our resource management experts. We’re here to help!

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