When considering a potential job offer, if your eyes jump to paid time off (PTO) right after salary and healthcare, you’re not alone. PTO consistently ranks as the second most important benefit, after health insurance. And as a benefit that increases productivity, lowers stress, leads to better performance, and boosts mental health, it’s unsurprising why employees place so much importance on an attractive PTO policy. But this can amp up the pressure to “get it right” for HR teams faced with writing a policy from scratch or updating an existing one. Below we cover exactly what human resources teams need to know when crafting their own PTO policy and include a sample for inspiration.
Like much of HR, paid time off programs come with their own lexicon. Here are some of the most common words and phrases you’ll hear in PTO discussions.
From settling on the “right” number of days to establishing an accrual process, we’ll go through everything you need to know about writing a PTO policy, including:
While the US is the only advanced economy in the world without any mandated paid leave (including parental leave) as of May 2023, most companies offer full-time employees some paid time off each year.
Most commonly, paid leave is offered as a single bank of PTO, where employees get a collective pool of days to use for time off, or traditional paid leave, where employees are granted separate allotments for vacation, sick, and personal days.
There is no one-size-fits-all policy. Deciding what’s best is specific to each organization, but here’s an idea of how they stack up.
According to the Society for Human Resource Management (SHRM), PTO banks grew in popularity pre-pandemic but some US companies have since returned to separate allotments for sick leave, with use of PTO banks dropping from 44% in 2020 to 41% in 2021.
“Some larger employers not only have increased their number of sick days to adhere to new federal requirements but also have started tracking days more diligently to better understand how employees are using them,” human resources manager Lisa Frydenlund told The Wall Street Journal, as reported by SHRM in an article on traditional and PTO bank plans.
Whether you’re an HR professional writing a policy or a job applicant sitting in an interview, questions about vacation days usually start with “how many.” While the answer should ultimately reflect your company’s values and norms, experts generally agreed on the same sweet spot: 15 to 20 days, excluding paid holidays.
How much PTO your company offers will depend on whether you opt for a PTO bank or traditional paid leave program. Generally speaking, PTO banks tend to offer less time (by a day or two) than traditional leave policies — but employees are more likely to use all their time off, as the benefit is often viewed as a perk to take advantage of. The workforce may be more likely to reserve some sick or personal days with traditional leave programs and are therefore more likely to carry over PTO hours or days.
SHRM research on paid leave programs found that companies with PTO bank plans typically offer 13 to 26 days of leave. For policies that allot separate categories for vacation, sick, and personal leave, the averages for full-time employees were 8 to 22 days for vacation, 7 to 19 for sick leave, and 4 personal days.
Most companies that offer paid leave use an accrual system. Employees gradually earn their time alongside hours or days worked — one hour of PTO for every 20 hours worked, for example. Since some HR tech platforms handle these calculations for you, accruals may require less number crunching than expected. These systems also support compliance, since some jurisdictions require accruals to be included on pay stubs.
Since employees must earn their PTO through time worked, accruals encourage retention and discourage employees from using their PTO all at once. At some companies, this means new employees aren’t eligible for any days at all. In other, more flexible arrangements, companies allow employees to “borrow” unearned time and go into the red to encourage team members to take vacations.
But accruals come into play in other ways, too. Here’s what else HR teams should consider when it comes to accrual arrangements:
Lastly, some teams scale up accruals or PTO limits based on tenure. Tenure-based vesting schedules have been applied to other forms of compensation, like 401(k) matching and equity for decades to boost retention and reward employees for their service. Why should vacation days be any different? HR experts generally favor the approach, within reason.
“It’s extremely important that you do it so it’s manageable. You don’t want someone in the company having four times as much as someone who just joined. It could cause other types of challenges and friction within the team when there are peaks of workload,” said Carlota Montoro, an international talent consultant.
Other organizations choose to grant employees all their PTO at once, as a lump sum or annual allotment. Employees gain access to all of the paid leave at one time, most often at the beginning of the calendar year.
Proponents say the simple system makes it easier for employees to keep track of their time off and provides a greater degree of autonomy for the workforce. Critics of this approach point out that it can encourage employees to take long stretches off at times, which can increase the workload across a team. New hires could use all their PTO early in their new employment, then quit.
While accrual policies are generally favored by most companies, a lump-sum PTO arrangement may better reflect your company’s values — especially if your organization emphasizes flexibility and transparency.
When unlimited PTO first gained popularity, it was considered a cushy perk offered by top employers. In theory, employees were encouraged to take as much time off as they needed — within reason, and at a manager’s discretion. But today, unlimited PTO remains one of the most hotly contested perks among HR leaders, labor law experts, and employees. Here’s why.
Lawyers in some states have gone as far as accusing tech companies of implementing the benefit solely to avoid costly payouts for departing employees.
Even so, there are a few perks that make unlimited PTO an attractive offering, especially at smaller companies or for businesses eager to attract top talent. They’re easier to administer, a benefit for lean HR teams without the time or budget to implement time off software, and flexible time off can also be a powerful lure for attracting job applicants.
If your org is set on offering an unlimited PTO policy, make sure you design and manage it well. Following these pointers can make all the difference:
While you’ll share the PTO policy with new hires, include it in the employee handbook, too, so your team can refer to it when needed. When drafting your paid-leave policy with employees, be sure to define:
Here’s a sample policy for a company that opts for a PTO bank with an accrual system. For further guidance on writing your policy, check out our time-off policy template.
Taking time away from work is essential to keeping ourselves healthy, productive, and content. We offer [a PTO bank system] that pools all paid time off into a single bank to use as needed. We use an [accrual system], meaning that you earn PTO for every [day/week] you work, and PTO is added to your PTO bank on a [weekly, bi-weekly] basis.
We provide all full-time employees with a minimum of [20 days], but those who have been at the company longer accrue PTO faster. Please see the accrual rate table below [insert accrual schedule below]. You [can/cannot] borrow against your PTO bank.
Part-time, contract, and temporary employees are not eligible for our paid time off policy.
Unused PTO may [not] be carried over into the coming year. If you don’t use all your PTO, balances of unused PTO will [not] be paid out upon departure from the company.
Please make your PTO request at least [two weeks] in advance for requests of more than [three days] in a row. All requests are subject to manager approval, and employees can submit requests through our HRIS. You must use PTO when taking time away from work, and employees can use PTO by the [hour or day].
In accordance with the Family and Medical Leave Act (FMLA), you do not need to use PTO for parental leave as it is provided separately. Additionally, you don’t need to use PTO for jury duty or company-recognized holidays.
Additional paid time off will not be granted, so please manage your allotment accordingly. Employees may use up all their PTO but still need to take personal time off, in which case unpaid leave may be granted, depending on the circumstance.
As a final note, please use your PTO. We know work is just one part of your life, and we encourage you to take time off to decompress, spend time with loved ones, and manage the logistics of your personal and familial life.
If you have any questions about our PTO policy, please reach out to [insert contact information].
*This sample policy is strictly meant to provide inspiration. Organizations should consult legal counsel and review state-specific laws before creating their own PTO policy.
It’s not always easy to get paid time off policies right the first time. Much like any other aspect of people strategy, HR teams should take a data-driven, iterative approach to paid leave.
Employee engagement surveys simplify the process of collecting and analyzing employee feedback at scale. With Lattice’s engagement surveys, HR can identify challenges with burnout, balance, and whether teams have enough time to disconnect. Fine-tuning your PTO policy is vital to getting employees to take advantage of their time off. According to a 2023 report by the Pew Research Center, 46% of surveyed US employees said they take less paid time off than their employer offers — a number that could translate to significant employee burnout.
While employees cite a number of reasons for not taking time off, the most significant might be team norms and manager expectations. Leverage engagement surveys to inquire about more than just the details of the policy by asking about workplace and team beliefs and expectations around PTO.
While hardly a cutting-edge perk, the right PTO policy can go a long way in maintaining a healthy and high-performing team, all while supporting retention. With so many paid leave options out there, direcft employee feedback via engagement surveys can go a long way in shaping the best policy for your business. For more in-depth strategies on how to combat employee burnout, check out Lattice’s ebook How to Prevent and Treat Workplace Burnout. For further guidance on writing your policy, check out our time-off policy template.
SHRM research on paid leave programs found that companies with PTO bank plans typically offer 13 to 26 days of leave.
While employees cite a number of reasons for not taking time off, the most significant might be team norms and manager expectations.
