Navigating Benefits

How to Design and Manage a Winning PTO Policy


  • Companies in the U.S. are not required to offer paid time off to employees—but many do

  • A PTO policy can help boost workplace productivity as well as attract top talent

  • Unlimited time off can be attractive to some employees, but may be harder to enforce

Posted by March 4, 2020

Though not mandatory, giving your employees paid time off (PTO) is one way to promote work-life balance and boost productivity at your business.

According to a study by the American Psychological Association, when companies develop a PTO policy alongside a culture that encourages workers to actually use it, they see an increase in employee motivation and productivity by upwards of 70%. Additionally, by setting the tone that personal life comes first, your employees are likely to feel more valued.

But what is the right amount of PTO to offer, and how should the different types of time off be treated? Here’s some guidance on creating a PTO policy for your unique workforce and tips for managing these absences.

Why Offer Paid Time Off?

Your employees’ personal lives will creep into office hours—it’s just an inevitability. From babysitters falling through to basements flooding, employers must anticipate that the trials and tribulations of everyday life will cause workflow disruptions from time to time. A PTO policy allows your employees to take care of situations as they occur without their paycheck taking a hit.

In addition to personal days, your policy can include sick days, vacation days and holidays. These breaks not only help your employees avoid burnout, but PTO is something job applicants highly value. According to a survey by Quickbooks, around 75% of workers consider it very important for an employer to offer paid vacation, sick and holiday time.

If that isn’t enough to sway you, the same survey shows that nearly 70% of businesses today offer a PTO policy. Offering a desirable plan may make all the difference in recruiting new talent and retaining key employees.

How Much PTO Is Enough?

According to the Quickbooks survey, the average American receives 30 days off per year, comprising a mix of holidays, vacation, sick time, personal time and volunteer days. But some employers take another route, offering a set number of PTO days (eight on average) to be used discretionally.

To stay competitive, your organization should consider what similar companies are offering. Both unlimited paid time off and generous parental leaves are gaining popularity among small businesses. Though popular, these can be hard to track and enforce.

For example, an employee’s absence may warrant a 12-week FMLA leave, but if they work for a company that offers unlimited paid leave, they may just use PTO. This can cause a disconnect between employees and managers: Without knowing the whole situation, a manager may expect an employee to return to work sooner than they should, which can ultimately hinder productivity and potentially exasperate health issues.

Contrary to what you may believe, employees with unlimited PTO tend to take fewer days off than those with a set number of days. But even employees with set PTO routinely leave unused days on the table, to the tune of $172 billion of lost annually. That’s why it’s crucial to draft a policy that makes sense for your workforce. Consider hosting meetings where PTO is discussed and allow your employees to anonymously submit what their dream offerings would be.

How to Manage Paid Time Off

In general, it can be easier to manage a paid time off policy with a lump sum of days to be used as the employee chooses. However, the request system should allow employees to indicate what they’re using the days for so managers can better plan for these absences. For example, if your employee is out sick, they may need more time off than they originally indicated, versus if they’re just taking the night off for an event.

Looking at previous requests can also help you create a manageable PTO policy. If your employees typically only use three days of sick time a year, that may be the magic number to offer. Additionally, offering more vacation or personal days in lieu of sick days can make it easier to plan for employees being away—and they’ll likely feel less guilty about using them.

If you’re using a company-wide time off calendar system, privacy must be priority No. 1. Though your employees should be diligent about communicating when they’re using PTO, they should never have to disclose the reason to their peers. Encourage employees to come directly to you should they have an illness or situation that could affect their work; this way, you can craft a plan together.

Remember that the hallmark of any great PTO policy is allowing some buffer time for employees to reacclimate after a vacation. Work with them before they leave to get as much covered as possible and when they return, help them get back up to speed. When your workplace prioritizes communication—before, during and after an absence—employees can take a vacation and come back refreshed and ready to dive back in.

Looking to add another employee benefit to your offering? Check out this guidance on navigating benefits from United Concordia Dental.

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