Paid time off: the pros and cons of a PTO policy

On the surface of things, it’s hard to argue with the value of having a paid time off (PTO) policy. Unlike the time off approaches of old, a solid PTO policy these days combines vacation days, sick days, personal days, mental health days, and any other type of time off you can dream up.

Having a single bank of days for employees to draw from when they take paid time away from work is nice and simple. It also allows employees to use their time off as they please without divulging their precise reasons, which is a step toward treating employees like adults capable of scheduling their own lives! Not to mention, you no longer have to monitor how employees choose to use their PTO—which amounts to one less time-consuming task on your to-do list.  

When all is said and done, a strong PTO policy can be mutually beneficial to employees and companies. The trick, of course, is in the quality of your policy. 

Protecting both worker and employer 

A quality PTO policy takes many factors into consideration to protect employees and employers alike.  

At the basis of most PTO policies is a protection of employee privacy. Employees who might not have taken needed PTO because their reasons felt too private or personal can simply take PTO at their own discretion. This can works wonders in support of more meaningful work-life balance and job flexibility. This also does away with a dynamic where employees must ask ‘permission’ to take PTO. Instead, so long as they’re following the rules laid out in the policy, they can request the time they need and get it.  

Because employers and the needs of the business need protecting as well, you’ll definitely want to put certain guidelines in place. For instance, you might ask that employees request PTO with at least two days advance notice (or more), except, of course, in emergencies or cases of unforeseen illness. Before you officialize your PTO policy, you’ll also want to lay out other guidelines for illness, vacation time, and personal time. Clarity is everything, so don’t be vague about when and how employees should request PTO. For example, highlight periods when PTO is off limits (barring emergencies), and be firm about how much notice is needed. 

Fun fact: Did you know that on average, paid leave accounts for about 7% of a business’s employee costs, making it the third highest behind wages and insurance? Be sure to crunch those numbers to ensure you’ll be able to honor whatever PTO policy you commit to! 

What are the pros and cons of paid time off policies?  

Since the government has no official requirements concerning PTO, how you choose to offer it to your staff depends in large part on your company culture. But since there is no magic formula which ensures you’re protecting your company’s interests while also providing a fair policy for your staff, the following pros and cons can go along way toward helping to guide you in the right direction. 

Pros 

• Equality. With a bank PTO policy, all employees get the same number of days off. It doesn’t matter if one employee takes a longer vacation while another takes extra time to care for a sick relative: everyone still gets the same level of access to PTO. That said, some companies opt for accrual PTO policies instead, which allow employees to earn PTO based on how many hours they work, or on seniority. This creates a less ‘equal’ dynamic, but the opportunity to earn PTO is still theoretically open to all. 

• Privacy. This one does bear repeating. If an employee requires a certain number of sick days or personal days, they can schedule their PTO as they see fit without having to explain how they’ve organized their time to their employer. 

• A competitive advantage. Some employees value a generous PTO package over a higher wage, so this may give you a competitive advantage in certain industries. That said, think twice about instituting an “unlimited PTO” policy, as employees tend to fear taking too much time off and end up chronically underusing such plans. 

• Simplicity. Employers and HR managers don’t need to do the tedious, time -consuming work of keeping track of sick days versus personal days versus vacation days. Instead, managing a PTO plan is as simple as noting when an employee uses their banked days. Similarly, employees don’t need to lie about their reasons for taking PTO if one type of time off or another is used up but they still need to take a day. 

Cons 

• Mismanagement. It’s up to employees to organize their time off, but this responsibility suits some better than others. For some, it can be difficult to plan ahead or make the most of their time off. Certain employees might be inclined to use fewer vacation days so they can still access PTO in case of an emergency. Meanwhile, others may choose to use the entirety of their PTO on an extended vacation (if your policy allows it), without considering the possibility of unforeseen circumstances that require PTO. 

• No official vacation. While having the same amount of days off or the same accrual rate promotes equality, the reality is that different employees have wildly different PTO needs. As they have no ‘official’ vacation period, an employee with kids or a sick relative may end up using most of their PTO on sick days. As a result they will likely be more vulnerable to burnout and exhaustion. 

• Unused PTO. Depending on your policy as well as the laws at play in your state or province, an employee who quits and happens to have a large bank of unused PTO can represent a significant financial burden. While in some states, workers forfeit their unused PTO when they leave their jobs, other states require employers to pay out any unused vacation time upon termination—regardless of what they may have outlined in their PTO policy. Regardless of state laws, many companies nonetheless maintain a good faith policy of paying employees for unused vacation time.  

Making PTO work for you 

Ultimately, making a PTO policy work for your employees and for your business comes down to ensuring that it lines up with your company’s core values. If your company culture is one that places importance on work/life balance (it should!), so too should your PTO policy.  

Another ofttimes overlooked step in creating a successful PTO policy is promoting it! It’s not enough just to create the policy. You have to make sure your policy is clearly communicated to both management and employees and is applied in a fair and consistent way. Otherwise, you can’t be certain the rules and basic principles of the policy will be respected. There’s nothing like a group meeting to accomplish this important task. A collective meeting can also be the perfect opportunity to mitigate some of the potential disadvantages of your policy by offering a few basic PTO management tips.  

Finally, it’s always a good idea to encourage employees to use their PTO rather than let it build up. Also, it should go without saying, but make efforts to prohibit employees from working while taking their PTO, as this is a great recipe for burnout. Work to cultivate an environment where all employees feel comfortable and supported in their ability to take time away. It will pay off. They’ll return to work revitalized, more productive, and a lot more likely to stay with the company in the long run.