How PTO Benefits Both Employers and Employees
Paid Time Off (PTO) is a common benefit many companies provide to attract talent and improve employee satisfaction. Thanks to PTO management tools, supervisors can easily review and approve leave requests. For employees, PTO offers a chance to take deserved breaks, whether for vacations or essential errands such as medical appointments or DMV visits during work hours.
Key Points About PTO
- PTO helps employers recruit skilled workers, boost morale, and support a healthy work-life balance.
- Various PTO systems exist, including accrual-based, upfront allotments, and unlimited policies.
- PTO can be calculated using different methods like annual hours, pay-period accruals, or hourly rates.
- PTO types can cover vacation days, volunteer time off (VTO), bereavement, and more.
If your organization is new to PTO, it may take some time to grasp the different types and decide on the best approach. This guide covers the essentials of PTO, why employers offer it, and common ways to implement it.
What is PTO?
Simply put, PTO is paid leave employees receive to be away from work. It usually requires managerial approval and can be provided upfront or accrued over time. Some employers grant a fixed number of PTO days at the start of employment, while others allow employees to accumulate days based on hours worked. We’ll explore these options more below.
Why Do Employers Offer PTO?
Many organizations include PTO in their benefits package for several reasons:
- Attractiveness to Candidates: PTO is a highly valued benefit, often influencing job seekers’ decisions.
- Employee Well-being: It allows workers time to recharge and handle personal matters that can’t be done outside work hours.
- Increased Productivity: Studies suggest that employees taking PTO tend to be more productive. For example, a study by Ernst & Young found a nearly 10% productivity increase for every 10 hours of vacation taken.
- Industry Standard: Offering PTO keeps your business competitive since many companies already provide it.
Morgan Williams, CEO and co-founder of PeakHR, highlights the importance of PTO in today’s workplace:
“Paid time off is often expected by candidates as part of their compensation. In a fast-paced world where employees put in extra effort, having time to pause is critical.”
Types of Time Off
- Volunteer Time Off (VTO): Some companies provide paid leave for employees to volunteer for causes like charity events or community cleanup, usually limited to a few days annually.
- Bereavement Leave: Allows employees to take time off, with pay, to mourn and handle affairs after a loss.
- Jury Duty: Employees are typically allowed paid leave for jury service, which some employers also compensate.
- Floating Holidays: These flexible paid days off can be used for personal or cultural observances, separate from fixed company holidays.
PTO Policies
- Unlimited PTO: Employees can take as much leave as needed, provided they meet their job responsibilities.
- Front-Loaded PTO: Employees receive their full PTO allowance upfront at the beginning of the year, simplifying tracking but requiring careful management.
- Accrual PTO: Employees earn PTO gradually based on hours worked or pay periods.
How is PTO Calculated?
1. Based on Annual Hours Worked:
Calculate total yearly work hours (e.g., 40 hours/week × 52 weeks = 2,080 hours). Then, divide total PTO hours by annual work hours to find an hourly accrual rate.
Example: 80 PTO hours ÷ 2,080 work hours = 0.0385 PTO hours earned per work hour.
2. Per Pay Period Accrual:
If an employee gets 80 hours PTO annually and is paid bi-weekly (26 pay periods), divide 80 by 26 to get PTO earned per pay period (approximately 3.08 hours).
3. Hourly Accrual:
For part-time or variable hours, PTO can be earned based on hours worked. For example, earning 1 PTO hour per 40 work hours results in a 0.025 accrual rate.
What Happens to PTO When Employees Leave?
While there’s no federal mandate, many states have their own rules regarding payout of unused PTO at termination. Be sure to understand the regulations in your state or region.
Incorporating PTO Into Your Benefits
Including PTO in your benefits can improve employee satisfaction by giving them time to rest and manage personal tasks, which benefits overall productivity. For employers, it serves as a strong incentive to attract and retain talent.
If you’re using Beyond as your payroll provider, their platform can help simplify PTO tracking and approvals, ensuring your company’s policies run smoothly and efficiently.
