Paid Time Off or Personal Time Off (PTO) – A Detailed Guide


Sharad Bhardwaj

Senior editor

Parul Saxena

Chief editor

Last updated: February 12, 2021

What is Personal Time Off & How Does It Works?

Personal Time Off or Paid Time Off (PTO) is a policy devised by corporations to provide flexible leaves. It is vital for employee’s mental and physical health, which could, in turn, drive more productivity and efficacy to your business. PTO is consequential in transforming leave provision in a modern workspace.

Personal Time Off policy pools the sick leaves and vacation time, giving employees the flexibility to choose the type of time off they desire. Instead of allocating different personal days off to the employee, you can maintain a single block of hours that gives leniency of choosing the paid leave.

Difference between Paid time off and Vacation

Vacation is a subset of PTO. It could mean that Vacation is PTO but not the other way round. The crucial difference between the two is: Vacation is requested in advance, whereas PTO allows you to take off from your allotted days off. Paid time off (PTO) also enable you to take off for wellness days. Remote working or work from home is another aspect included in PTO ensuring flexible work environment.

Employers who are offering vacations have to maintain different accruals. Why is the employee taking the day off? Is it required? Is it going to impact the performance of the company? And multiple questions will arise, whereas the PTO will have fewer records to maintain.

In Paid Time Off vs. Vacation, the trend is likely to favor PTO. Because it permits the employee to spend the day as per his convenience, it could be for sickness, leisure, and mental health wellness. The employee can take leave without any prior permission even if they have used their vacation leaves.

Benefits of Personal Time off

There have been many cases where companies offered more paid sick leaves than paid vacation days. The aftermath, employees, started calling in sick at an alarming rate. Therefore many people have argued on the fact that PTO is better than allotting specific days for Vacation and sick leaves. The significant benefits of PTO are as follows:

  • Schedule leaves

The employees are eligible to schedule PTO at their discretion. It saves a lot of time for the administrative officials, as they don’t have to monitor the leave report of the employees on a timely basis. It empowers the employee to decide as an individual without any intrusion or supervision.

  • Handle administrative process

Providing your employees with different sick leave and vacation days engages you to keep track of the employee’s record. It complicates the process at the executive level because of prompt regularization of documents. Earlier it was found that the employees are deceptive about why they needed leaves.

After the Introduction of PTO to the system, the process has simplified to a significant level. You have to record whether the candidate is present or absent and don’t have to bother about reasons.

  • Stable Workspace

If your employee works for an entire year without Vacation or leaves, they might feel sapped. It could deteriorate their efficiency, and they may not work up to your company standards. It leads to unexpected sick leaves, which may dwindle your company’s performance.

Paid time Off not only gives flexibility to the employees but also provides a competitive advantage to the workforce. It enables the employee to reschedule their leaves if any urgent project is underway.

  • Work-life balance

As Paid Time off accredits the employee to use leaves at their discretion, it lets them maintain a harmonious balance between their personal and professional life. It will enable them to prioritize their dual aspects of life without causing any commotion. It will empower your employees to oblige to their every day’s demand alongside their work schedule, rendering to satisfied and efficient employees.

  • Diversified platform

People working in your enterprise may belong to different religion and cultural background. PTO entitles them to take the day off for the cultural celebration. For some employees, birthdays and anniversaries are more promising than any other occasion. PTO enables them to take a break from their grinding work schedule and spend quality time with their friends and families.

It allows you and your employees to furlough for festivities and events that are not recognized by your organization as a whole. The employees would feel valued, and a delighted employee is always competent in work. In short, PTO benefits you to ensure employee retention and dazzle a diverse workforce.

Types of PTO policy offered by companies

Some companies offer abundant days to employees for time off from work, whereas other companies grant an only certain amount of days for leave. It is essential for an employee to know about PTO policies mentioned in the employee handbook. These are the types of PTO policies practiced by companies.

  • Vacation

    The employee gets paid for Vacation. It may vary from person to person and company to company. Some companies offer more vacation pay to an experienced employee than a fresher. A vacation policy explains the rules related to the PTO for vacations. An employee gives notification before taking leave so that his absence does not hamper with business operations.

  • Sick leaves

    Sick leaves offer Paid Time Off to the employees. It is imperative as the employees or co-worker of the company does not get influenced by the ill-health or injury of another employee.

  • Personal leave

    It includes individual task like leisure, doctor appointment, quality time with family, or any other recreational activity. These leaves should not fall under traditional vacation days or sick leaves.

  • Grieving

    Also known as bereavement leave, this leave is usually taken on the demise of any family member, next of kin, or acquaintance. Some companies offer bereavement leave based on the relationship of the employee with the deceased.

  • Parental leave

    Paid parental leave is a PTO offered by some enterprises to their employees for maternity and paternity leave. It enables the parent and single parent to take care of their child in the best possible way. Many companies have adopted a protocol in which the employee can work from home simultaneously while meeting the demands of their personal life.

Paid time off policies for small companies in India

Employment laws in India design a framework to devise different PTO policies that enable the employee to opt for different types of leaves. There are various employment laws proposed for paid time off policy for SME’s. These PTO policies for small business in India has given an edge to the working class of different sectors.

  • National Holidays

In India, companies grant PTO on a few occasions. The national holidays observed in India are Independence Day, Republic Day, and Gandhi Jayanti. Many SME’s have developed an employment law paid off policies that allows the employees to work on these days at their discretion. These SME’s pay them double or provide incentive provisions to the employees for that day.

  • Weekends

Some workaholic employees engage themselves with work on weekends as well. PTO policies by small companies provide extra wages for weekends and overtime. Some companies add these weekend holidays to the vacation days or sick leaves.

  • Volunteering leave

PTO policies for small business have benefited the employees of few SME’s. They can apply for volunteer leaves that allow them to participate as a volunteer in charity events. They can also represent the company in campaigns related to social welfare. PTO entitles them to serve their organization outside the business network.

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Calculation of PTO hours and Time-off tracking

To implement the PTO policy, maintaining a well-organized accrual of your employees is vital. Desync between the actual time worked and the estimated time might disrupt PTO policies leading to a slump in an employees performance and business operation.

Platforms such as attendance management software and payroll software could be of considerable advantage to dictate the PTO terms. Companies use different rates like daily, monthly, or yearly hours worked on calculating PTO hours. Time off tracker is another facet that estimates the accrued time off.

  • Tracking time off

Time off tracker plays a significant role to calculate time away from work. Accrued time off is time off that employee has earned but has not used. Employees can redeem these leaves into cash or roll over the days off to the next year.

Integration of payroll software makes the entire process seamless. It determines the accrued time off by calculating the number of paid days off earned by employees and subtracting it with the time used from earned paid time off.

  • Daily calculation

Daily accrual rates is another method used to calculate PTO hours. Attendance management software and time off tracker keeps a record of the number of hours an employee has worked in a day. To calculate daily rates, you have to divide the number of hours to accrue per year by the total number of working days in a year.

  • Monthly calculation

Attendance management and payroll software along with time off tracker used to calculate productive PTO hours. It is easy and less baffling to calculate with this accrual rate method. You have to divide the total number of PTO granted per year by entire working days in a month. The merit of this rate is that the employee PTO is easily traceable even if their record gets displaced.

Consideration while drafting PTO policy

Before replacing vacation days and sick leaves with PTO policies, you should consider the following parameters and set some ground rules with your employees. Here are some conditions that you need to contemplate before planning and proposing paid time off policies

  • In SME’s there is a limited number of candidates employed. It could be troublesome if too many employees take the day off at the same time. So you should consider designing the policy in such a manner that most of your workforce is not on leave.
  • Are the accrued days credited in the employee’s account viable to roll over to the next year? If yes, then for how long?
  • Can you cash out PTO at the time of employee’s resignation/termination?
  • Is it a limited or unlimited Paid Time Off offered to your employees?
  • What kind of early notice are you expecting from your employees before they opt for PTO?
  • Is it for all paid absence or unexpected leaves are also considered?

In a world of cutthroat competition, it is necessary to devise any plan or policy that will entice an efficient workforce. Before implementing a PTO, you should consider that it meets your as well as employees demand. There should not be any lacuna in PTO policy that could initiate a dispute. Many companies have already adopted the paid time off policy as it is a significant reason for employee retention and high-yielding work environment.

Sharad Bhardwaj is a content analyst at SoftwareSuggest. He loves to advise and help people. In leisure time he likes to be involved in sports activities and listening to music.

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