Is PTO Right for Your Organization?


Taking a sick day or requesting vacation is a thing of the past for many companies. In recent years, many companies are experimenting with paid time off (PTO) as opposed to the traditional vacation, sick and holiday benefits packages.

Understanding PTO

Unlike traditional benefits, PTO is a bank of hours that employees can draw from for a number of reasons, including taking a vacation, taking care of a sick child, going to a doctor’s appointment or needing a personal day off from work. Employers either credit the employee’s bank every pay period with a specified amount of time that they can use, or credit the year’s worth of days at the start of the year. For instance, if the employer would offer paid holidays, vacation, personal days and sick leave days, then the employee would bank PTO days off in their place. Instead of these days being itemized by the employer for a specific purpose, the employee uses the days at his/her discretion. (Some PTO plans keep paid holidays separate from the rest of the PTO.)

There are two ways to distribute PTO days. Some employers credit the full annual number of days to the employee’s account on January 1. Others prefer the days to accrue throughout the year and deposit days each pay period.

PTO plans promote a work-life balance by allowing employees to determine when they should take time off and what they should use it for.

Benefits of PTO

There are several benefits for both the employee and the employer of using a PTO plan versus the traditional vacation and sick benefits allotment.

  • The company appears more attractive to potential employees and current employees because they are allotted more days to take off. Since most employees do not use all of their sick days, they view the lump sum days as more vacation time.
  • Employees are treated as adults and are able to make their own decisions regarding vacation and personal time without having to provide an explanation to their employers.
  • Employees do not have to lie about being sick to take care of personal issues that they would rather not discuss with their employer.
  • Healthy employees don’t feel “penalized.”
  • Employers have more control over unscheduled absences that can become very costly.

Regardless of whether you have traditional time off categories in place, or you decide to move to a PTO bank model, offering employees time off from work can be an easy way to round out your benefits package.

If you have any questions, or need assistance with your PTO policy, the MBA Legal and HR Services are here to help