How to Create a Paid Time Off Policy That Rewards Employees

No matter who you are or what industry you work in, sooner or later, you'll need a break.

If we go too long without stepping away from our jobs, chances are we’ll feel overworked and underappreciated. 

As an HR professional, your job is to put the best interest of the company and its employees front and center. Often, that can mean deciding which employee benefit programs are the right fit for your company's compensation and benefits plan. There’s a lot to consider including what kind of paid time off you want to include. 

How much you offer, or when you allow employees to use their PTO, can vary. Using benefits administration software can not only help create a paid time off policy for employees, but can also keep track of how much PTO employees are using.

Types of paid time off

Before you can determine when employees can take advantage of and use their PTO, you need a full understanding of the types of paid time off you can offer in your policy.

Vacation time

Those with a case of wanderlust tend to make the most of vacation time. Vacation pay is a form of time off that employees use to travel or spend time with family and friends. Or simply to take a much-needed break from working to avoid burnout. 

The number of days you decide to offer for your company vacation policy will vary and should be thoroughly explained to your staff during their onboarding process. Details should also be found in the employee handbook. For example, you may expect employees to give at least 30 days' notice before taking advantage of this type of PTO.

Personal time

Your employees are going to have doctor’s appointments, family emergencies, car problems, and other last-minute events that they won’t always have a ton of heads-up beforehand. This type of paid time off falls under personal time, which doesn’t have to be used for anything specific. 

Employees can use personal days without having to take from their vacation days, and this time of PTO is used on an as-needed basis, often last minute.

Sick leave

You never want an employee to feel like they have to come into work when they’re sick because they don’t have the needed paid time off to cover it. If an employee is injured or feeling under the weather, they can use their sick days and feel encouraged to stay home, rest, and recuperate.

Whether in-office or working from home, employees simply will not perform at the highest level when they’re not well. Working with others while sick could expose your entire office to illnesses, and working remotely while sick will be ultimately unproductive – hence the necessity for sick leave. 

Bereavement

Bereavement leave is paid time off employees use when a family member or friend passes away. This came can be used to cope with the loss of a loved one, make necessary arrangements, and attend services.

The amount of bereavement time offered to employees can sometimes vary depending on the relationship with the person who is deceased. For instance, your company may provide more time for a parent or sibling rather than an aunt or cousin. This should be specifically laid out in the section of your employee handbook that explains your time off policy.

Holidays

As the name suggests, holiday pay is awarded to employees on specific holidays. 

Your company may also choose days outside federal holidays, like MLK Jr. Day, President's Day, Easter, Columbus Day, and Veterans Day, to give off to your employees. There are also floating holidays, which can be used at any point in the year. 

Jury duty

If an employee gets called to serve on a jury, you may offer them paid time off in order to do so. When an employee receives notice from the federal, state, or local court of their official summoning, you may choose to require your employees to show this letter in order to qualify for this PTO.

Parental leave

Paid parental leave can be either maternity leave, paternity leave, or adoption leave. Keep in mind that depending on the size of your company, you might be required by federal law to offer unpaid parental leave. 

Additionally, your state might have more restrictions regarding parental leave than others, so it’s always in your company’s best interest to do its due diligence regarding parental leave laws.

Voting time

Whether it be during local or presidential elections, voting time is PTO offered to employees to vote in these elections. Usually, this type of time off is limited to a few hours as the full day is generally not needed.

This is another type of PTO that can vary from state to state as needing to be paid or unpaid time away from work. 

Military leave

Your company may choose to offer PTO to employees for active duty, active duty training, or inactive duty training. There are specific guidelines for this time off in place by the Uniformed Services Employment and Reemployment Rights Act, which requires companies to offer an unpaid leave of absence to employees in the military for up to five cumulative years.

Advantages of offering paid time off

A fully built-out PTO policy can offer benefits to not only employees, but businesses, too.

One clear advantage is that employees will appreciate the flexibility the paid time off package offers them. Knowing that your company values them enough to create a PTO package with their best interests in mind can go a long way in not only retaining top talent but also attracting it. 

Additionally, your employees will feel like they can be honest with their managers and HR leaders when they’re too sick to come to work, when they have a doctor’s appointment, and when they’re feeling burnt out and simply need to take a day off. 

Team leads and managers will also have a heads-up when a team member is out of the office, as paid time off allows employees to schedule their time out of the office in advance. Having this notice can come in handy when making a schedule or planning projects in the future. 

You’ll also likely see an improvement in your employees’ mental health, attitude toward work, and productivity when given ample time off to use as they’d like to ensure a healthy work-life balance. 

Disadvantages of offering paid time off

There are some disadvantages to offering paid time off that are important to consider when developing a plan. 

For instance, many states require employers to pay out unused paid time off to employees when they quit or retire, which means your business will not only have to track accumulated time for their employees, but also owe them money for unused time if they were to leave for their next opportunity.

Additionally, paid time off policies that require employees to use their allotted time or lose it at the end of the year often deal with many employees taking end-of-year vacations, leaving massive absences in the workplace and a heavy burden placed on members who are working. 

Sometimes, certain employees view paid time off as vacation time and often come to work when they are sick to prevent using a paid vacation day. To avoid this, your company will also need to include sick days in its PTO plan. 

And some employees consider paid time off as a benefit, so many of them use all of their time off, regardless of if they had a vacation planned or not. The ‘use it or lose it’ policy instead of a rollover policy encourages employees to use the time rather than lose it.

How to create a paid time off policy

Now that you know the pros and cons of a PTO policy and all the varying types of days and holidays you can include, let’s explore how to start creating a policy. 

It’s important to keep in mind that these policies vary from company to company and from industry to industry, but here are some basic steps to get you thinking.

First things first, take a deep dive into the regulations in your state. This way, you can be sure you consider HR compliance within your policy.

Next, compare what you’d like to include with what your competitors offer their employees. Going above and beyond your competitors in regard to your PTO plan can give you a leg up in hiring top talent.

You’ll then need to decide if you want your paid time off policy to accrue with your employees’ overtime, and if unused days will roll over into the next fiscal year. Once everything is squared away, put the policy in writing, preferably in your employee handbook. You’ll also want to take advantage of the right tools, like time and attendance software, which will keep everything regarding your organization’s PTO plan in one place.

How much paid time off should you offer your employees?

One way to determine how much PTO you should offer is to consider how long they have been at your organization. Most employers use a sliding scale that rewards employees who have been with the company for a long period of time with more paid time off days.

Use the example below as a base for creating your own paid time off policy:

• Less than one year of service: 14 days
• 1-3 years of service: 16 days
• 5+ years of service: 18 days
• 10+ years of service: 24 days
• 15+ years of service: 27 days
• 20+ years of service: 30 days

Rest, relax, and rejuvenate

A little time away from work never hurt anyone. In fact, it can go a long way in showing your appreciation for your employees. Whether your direct reports are off sitting on a beach somewhere, taking their dog to the vet, or voting for our next president, it’s important they get a chance to do so.

After all, their inbox will be there when they get back. 

While you’re in the mood to show appreciation to your employees, learn more about how you can award merit pay for a job well done.

This article was originally published in 2020. It has been updated with new information.