Posted By:

Trish Barnes on May 8, 2014

How to Develop a Paid Time Off Policy

A paid time off policy is used by many businesses to accommodate the needs of employees. This plan condenses vacation days, sick days and personal days into a singular policy where employees can take time off as needed. It’s an appealing plan to many workers because it offers flexibility and can lead to increased job satisfaction. A paid time off policy is beneficial to employers because it makes it easier to manage and monitor the days that employees take off. It should also minimize the number of last minute, unscheduled absences.


What Employees Need to Know About Paid Time Off Policies

The amount of time an employee has been working for a company will directly impact the number of PTO earned per hour. Employees that have been there longer will earn more time and vice versa. For instance, an employee who has worked at a company for 1 – 2 years might earn 0.7 per hour, while an employee who has been there for 5 – 6 years might earn 1.2 per hour.

Depending upon the organization and policies in place, PTO may only be available to full-time employees. Part-time workers, temporary staff and interns don’t always qualify. It’s also important for employees to be aware of how many days they’ve accrued. Because some businesses will automatically forfeit any unused days at the end of the year, workers can end up losing their PTO. If an employee gives a two week’s notice before resigning, they may be compensated for any unused PTO. Here’s how to develop a paid time off policy for your business.

Create a Basic Outline

When starting out, you need to first consider who will be eligible for PTO. Is it strictly for full-time employees, or will it be offered to part-timers as well? Next, you need to determine which types of days off are covered. For instance, you may want to cover sick days, jury duty, unexpected illnesses, emergencies, etc. You will then want to come up with the accrual rate per hour, which correlates to the length of time that employees have been working at your establishment. This template will provide you with some examples and serve as a reference point.

Figure out whether or not you will allow PTO to carry over at the end of each year of if any unused time will be automatically forfeited. Decide how far in advance employees must notify you when they want to use their PTO and what the penalties are for excessive unscheduled absences. Finally, you should have a plan for what happens to a worker’s PTO when they resign.

Get Employee Feedback

Before implementing your policy, it’s smart to go over your proposed plan with employees to get their input. With the goal being to keep team members happy and help balance their work and personal lives, the details should be discussed. You may even want to create two or three potential policies and make some adjustments before deciding on a final version.

Having a paid time off policy not only helps attract and retain top talent, but will improve operations in many cases. When employees get the time off they need, this can lead to increased job satisfaction and ultimately a more productive workplace.