All organizations will operate a paid time off (PTO) policy as their employees will need time off to rest and relax. This time off can be in the form of vacation time, public holidays, time off for sickness and personal leave time. If you have a large number of employees, then this can be difficult to manage.
It may be that you allocate a set number of days for each type of PTO, depending upon the grade of the employee and the time they have served with the organization. Or you may allocate a set number of days which employees can use at their own discretion.
We will examine the different types of paid time off here, and the systems that need to be in place to ensure that it all works smoothly. Policies adopted by different organizations will also be discussed, so that you can formulate the best PTO policy for your organization.
Related: The Cage that Frees: Why Good Policy Matters
What Is Paid Time Off?
This is authorized time where the employee will not work, and still be compensated at the standard pay rate or agreed prorated or fixed amount of pay. All employees should be eligible for paid time off where they can take a vacation or deal with personal issues.
Although there are not any hard and fast legal requirements when it comes to paid time off, Organizations will sanction this policy to attract people to work for them instead of their competitors. A good PTO package will also help with the retaining of highly valued employees.
Which Paid Time Off Plan Should You Adopt?
It is becoming more and more commonplace for employers to offer a paid time off plan to their employees. This is a flexible situation where a specific number of days are allocated to each employee, and they can use them for whatever purpose they choose.
These days off are intended to cover times when the employee is sick or injured, individual days where an employee needs to attend to a personal issue, and the taking of a vacation. The number of days allocated will normally increase in line with the number of years service and the grade of the employee in the organization.
Paid time off for a vacation is a benefit that is voluntarily offered by organizations. It is very rare to find any employers that will not offer a paid vacation entitlement. The calculation of vacation days can be complicated in some organizations, but there is really no need for this.
A simple vacation entitlement based upon the number of service years and the pay grade of the employee is recommended here. It is easy to produce a scale that is easy to understand by employees and managers alike. If an employee has been with an organization for a long time (15-20 years) then it is not unusual for 4 weeks or more to be offered.
Deciding On The Start And End Dates For Paid Time Off
A decision needs to be made whether an employee’s paid leave entitlement starts from the anniversary of their starting work, or on a calendar year or financial year basis. If the start date anniversary is used, then this will carry a higher administration overhead if it is in place.
Calendar or financial year PTO management is a lot simpler. If an employee joins half way through the year, then a pro rata leave package can be granted for the remaining time. These fixed date systems are clearer for both employers and employees.
Leave Carry Over Policy
There are all kinds of reasons why an employee would not take their full PTO entitlement in a year. It could be that operational pressures prevent them from doing this. Sudden unplanned demand, or staff shortages, can place managers in the position where they have to request that employees do not take time off for a specific period.
Some employees are not very well organized when it comes to scheduling time off, and will find that the end of the year is approaching and they still have many days to take off. This is unlikely to suit operational requirements, so a decision needs to be made about carrying over PTO into the next year.
You may want to allow employees to carry over a certain amount of PTO days into the next year. This can be a satisfactory arrangement for both parties, as it provides some operational management freedom and personal freedom for the employee. Organizations normally grant between 5 and 10 days to be carried over per year.
Some organizations will be prepared to offer a cash payment instead of carrying over the unused PTO days. This could be a contingency arrangement if a whole team of workers have had to carry PTO days over because of operational pressures.
Recognizing Public Holidays
It is commonplace to offer PTO for a number of public holidays throughout the year. This is not enforced by law, but most smart organizations will do this. The eleven public holidays that most organizations will grant with PTO this 2021 are:
- January 1 – New Year’s Day
- Third Monday in January – Martin Luther King Day
- January 20 – Inauguration Day
- Third Monday in February – Washington’s Birthday
- Last Monday in May – Memorial Day
- July 4 – Independence Day
- First Monday in September – Labor Day
- Second Monday in October – Columbus Day
- November 11 – Veterans Day
- Fourth Thursday in November – Thanksgiving
- December 25 – Christmas Day
Depending upon where your organization is located, there may be local holidays that most employers will observe.
If your organization needs to schedule work hours during these public holidays, then the standard practice is to pay a higher rate for working on these days. There are laws about the observance of religious holidays, such as Jewish people being given time off for observing Yom Kippur.
Managing PTO Days
This can be a real challenge with a manual system, and the administration overhead will be high if a lot of people are employed by the organization. It is far more efficient to implement an automatic PTO system.
Most PTO systems will let you design and customize them to fit exactly with your PTO. All time off requests are managed electronically, and full records are stored and updated. Employees can see what PTO entitlements that they have for the remainder of the year, and their manager’s will be able to see this too.
Requests for time off can be approved or denied instantly by the employee’s manager. A manager can instantly view the scheduled leave of their team, to see if any operational issues are likely to arise by approving the leave request.
PTO entitlements are automatically calculated for each employee in line with policy, referencing grade and years of service parameters. A good time off management system will also manage the carryover of PTO days automatically. Full reporting will be available for line managers and HR staff, and anyone else that needs them in the management team.
Note: PTO policies should be examined in conjunction with any applicable laws.
