Here's everything you wanted and need to know about a PTO policy

Paid time off (PTO) is one of those work benefits you don’t want to miss out on. Stress, anxiety, bad health, and relationship issues are all side effects of working too much. These lead to poor performance in the workplace and little or no work-life balance.

A company offering a good PTO policy shows that it values its employees, who, in turn, maintain their wellbeing and contribute toward company goals as a happy, productive employee. So, what makes a good PTO policy and how do you ensure you maximize this to achieve work-life balance?

In this article, we’ll explore:

• What is a PTO policy?

• How are PTO policies structured?

• How many PTO days can I expect?

• PTO Policy FAQs

What is a PTO policy?

Companies establish a paid time off (PTO) policy as a method to provide the rules and expectations as to when and how employees can receive pay for time off work. Typically this relates to taking time off for a vacation, personal days, and sick leave, but some companies also extend this to a bereavement, jury duty, or volunteer days.

Having a good understanding of an employer’s PTO policy may help you decide whether to accept a job offer, or it could make you realize that your existing employer is a great catch. Either way, being informed on the PTO policies will ensure you maximize this employee benefit and achieve a good level of work-life balance.

How are PTO policies structured?

As an employee, the key things you’ll want to know about your company’s PTO policy are how much paid time off your employer will provide, the way you can earn or accrue this time, and the rules to follow in order to take paid time off. 

Here’s a breakdown of the three core PTO policy structures that employers typically use: 

1. Traditional leave

The traditional leave policy involves a set number of PTO days or hours that can be taken for a specific reason: either vacation, personal leave, or sick days. Typically, the number of days or hours will rise in each specific category as your tenure with the company increases. 

The traditional PTO policy is the most common in the U.S. but it is waning in popularity with more modern companies. This is due to the fact that this system can be time-consuming for HR (in terms of tracking the reason for paid time off) as well as making employees feel more trusted by their employers (instead of having to prove when they’re sick).

2. PTO bank systems

Much like your savings account, this type of PTO policy involves a banked number of hours that can be used (or spent!) in any way you wish. Hours are typically earned based on the amount of time you have been with the company and the number of contracted hours.   

PTO bank systems offer much more flexibility than the traditional PTO systems as you aren’t restricted by categories. For example, a PTO bank structure may provide you with 150 hours of PTO to be taken for any reason. Conversely, a traditional PTO policy will require you to take two weeks of vacation time, 15 hours of sick leave, and 15 hours for personal days.

3. Unlimited PTO systems

Unlimited PTO systems are typically results-based and allow you to take unlimited leave for various reasons. One trailblazer in this area is HubSpot, who offer unlimited vacation and a global week of rest in July (sounds like heaven!) for all employees. Essentially, you decide when and for how long to take time off, for whatever reason you choose.

This structure is clearly the most flexible, requires the least administration, and makes employees feel trusted and respected by their employers. Typically, line managers will still discuss approval for time off with employees to ensure there is no negative impact to job or company performance, but so long as expectations are met, the flexibility remains.

How much PTO do most companies give?

With no standardized PTO policy in the United States, there’s no hard and fast rules that an employer needs to follow. As such, it can feel like a bit of a moving target. The average PTO is determined by several factors. A report by the U.S. Bureau of Labor Statistics (BLS) breaks PTO down by private industry and state/local government, combining the average number of sick and vacation days, as well as length of time with the company.

Here are PTO policy examples:

PTO Policy FAQs

Here’s some frequently asked questions on PTO policy to ensure you’re fully informed when it comes to assessing or negotiating paid time off benefits:

What is the law on PTO in the U.S.?

PTO is governed by the Fair Labor Standards Act (FLSA) which states that payment is not required for time not worked, including vacations, sick leave, federal, or other holidays. Essentially, this is a benefit that is an agreement between an employee and employer. 

Is PTO considered as wages?

This varies from state to state. In California, earned vacation time is considered as wages and is earned (or vests) as work is performed. For example, if employees are entitled to four weeks (20 work days) of vacation per year, after six months they will have accrued 10 vacation days.

Can I use accrued PTO whenever I choose?

Pretty much yes, but there are some caveats. PTO has to be requested and approved via the channels outlined in the PTO policy. Employers can also deny PTO requests or revoke PTO approvals if they feel this will negatively impact your job performance or the company.

Does PTO reset every year? 

Whether or not PTO resets or rolls over every year is subject to company policy and state law. Some companies will have a use-it-or-lose-it policy where you must use all PTO by the end of the year. Other companies will allow employees to roll over unused PTO into the next year. 

Does a company have to pay out PTO if I decide to leave my job?

While it is not mandated by federal law, certain states may require a company to pay accrued PTO to employees who leave the company voluntarily or involuntarily. Some states consider accrued PTO as compensation and it cannot be withheld. In other states, if the company policy specifies that accrued PTO will be paid out, then it must be paid when the employee leaves.  

If you’re just starting a new job and navigating the first three months (before you submit your PTO request!), check out Career.io’s First 90-Days Plan. We can help you seamlessly transition into your new job and position yourself for growth and advancement.

Key takeaways

1. PTO policies provide a guideline to employees in respect of how and when they can take time off with pay, whether for vacation, sick leave, or personal days.

2. Good PTO policies are a win-win. Employees can maintain work-life balance and feel more valued, which leads to happier, motivated, and more productive staff teams.

3. There is no legal requirement for companies in the U.S. to provide PTO, but many employers offer this benefit via traditional, banked, or unlimited PTO structures. 

4. Review your company’s PTO policy and ask HR questions to ascertain how much PTO your employer will provide, the way you can earn or accrue this time, and the rules you need to follow in order to take PTO.