What should your PTO policy look like?

In a pre-coronavirus world, paid time off (PTO) was simply one more benefit to bring to the negotiation table. But now, employers are taking a much closer look at their paid time-off policies, and with good reason. There’s a lot to consider.

While you are not required by law to have a PTO policy, most companies choose to offer them as a means of attracting and retaining their employees, among other reasons.

Before you rubber stamp your leave policy, though, it’s important to consider your options, relevant laws, and what should be included. The following considerations can help you decide what your company’s paid time off policy will look like.

Benefits of a PTO policy

It used to be that most employers who offered paid time off separated it into categories like vacation, sick, and personal days. Now the trend is to lump them all together under PTO, letting the employee choose how to use them. Many employees — especially healthy millennials — prefer this type of flexibility, and for employers, it means they only have to keep track of one type of leave, not several.

In general, providing paid time off is good for the health and wellness of your employees and your business. The World Health Organization recently categorized “corporate burnout” as an “occupational phenomenon” caused by poorly managed workplace stress. It’s no surprise, then, that companies who provide paid time off typically have lower health care, workers’ comp, and turnover costs, as well as higher productivity and employee engagement levels.

Laws governing PTO

Although some states require employers to provide a certain number of sick days to their employees, most do not. And no state or federal law mandates that you provide paid vacation time. However, if you do choose to offer paid time off, or if you’re contractually obligated to (in a collective bargaining agreement, for example) you should check with federal, state, and local laws governing labor and wages.

For example, in California, once an employee has accrued PTO, it can’t expire, and unused time must be paid out to them upon separation. However, employers can put a reasonable cap on the amount of time an employee can earn. In Texas, by contrast, an employer can implement a “use-it-or-lose-it” policy, whereby accrued leave must be used within a certain timeframe, otherwise it’s forfeited. Look up your local requirements, and as always, it’s a good idea to check with a lawyer before green-lighting any PTO plan.

What to include in a PTO policy

Once you’ve researched your legal obligations regarding PTO, be sure to provide employees with a clear, detailed explanation of the benefits you’re offering. Include details such as:

  • How time is granted: for example, at the beginning of the year, or in an accrual system (such as one hour of paid leave for every thirty hours worked)
  • How many PTO days they can earn
  • How many working hours are required before an employee is eligible to accrue or use their PTO
  • How to request time off
  • What happens to accrued and unused PTO when an employee leaves the company
  • Which department or person is responsible for administration of benefits
  • Relevant state and local laws

In your written policy, be especially clear about limitations and exceptions to any benefits you’re providing. Include your policy in the employee handbook, and explain benefits thoroughly when onboarding a new hire. Being upfront from the beginning will help avoid uncomfortable surprises and confusion down the road.

Creative PTO programs

Some companies are also adopting newer, more creative ways of offering paid time off. One growing trend is unlimited PTO where employees take any amount of time off that they want. It sounds rife for abuse, but some research has shown it offers greater work-life balance, may result in fewer days taken off, and can actually save company money.

Other companies encourage employees to recharge and expand their horizons by paying for them to travel. Companies like FullContact take things to the next level by offering PTO, $7,500 per year for travel, and forbidding employees from working while on vacation.

Whatever your PTO plan looks like, you’ll want it to be comparable to policies offered by companies you compete with for future employees. But it also has to be something your company can afford.

Recruit and retain top talent

Perks and benefits like a solid PTO policy are increasingly important to attracting and retaining high-quality candidates. They support work-life balance and show you care about the wellbeing of your employees. Get more tips for recruiting top talent by signing up for Monster Hiring Solutions, where you’ll receive expert recruiting advice and the latest hiring trends.

Legal Disclaimer: None of the information provided herein constitutes legal advice on behalf of Monster.