How does PTO work and why is it important?
A Paid Time Off (PTO) policy - where vacation time, sick days and other personal days are pooled into one bank of days or hours - is now a must-have for any business that wants to attract the best talent and foster a positive culture.
Indeed, these policies are in high demand among workers. According to research from TriNet, 89% of employees consider PTO important to their job satisfaction and rate this as an important factor when considering whether to take a new position. It's an issue that's especially important in the US, where PTO isn’t a federally mandated requirement, so there may be much wider variation between firms as to what they offer.
However, having a PTO policy isn't just about keeping workers happy. If done right, it can also deliver great business benefits in terms of improved overall productivity. So how do you reap the rewards of a good PTO policy?
What type of PTO policy will work best for you?
The first step in redesigning your PTO strategy is to determine what type of policy to go for. There are a few options available and they each have their pros and cons, both for employers and workers, so it pays to think carefully about the impact this will have.
1. Traditional PTO
The most traditional type of PTO policy is a fixed allocation, which gives employees a set number of days a year they may take off for any reason. However, while this may be the easiest to manage, it could lead to issues if, for example, employees take large amounts of time off towards the end of the year in order to use up vacation time.
2. Earned, or accrued time off
One way to avoid this is to have a PTO policy that allows employees to roll over unused time. A policy where time off can be accrued also rewards long-serving employees and helps boost retention.
3. Unlimited PTO
Another growing trend is to offer unlimited time off, with no restrictions on how many days an employee can take off. This may be a route many businesses are wary of as they may worry about such privileges being abused, but this strategy has the support of some of the world's most notable companies, such as Netflix.
One high-profile supporter of this strategy is Richard Branson, who argues this can be great for productivity as it’ll foster loyalty among employees and ensure they’re "giving 100% back" to the company.
The benefits of a good paid time off policy
While there are some disadvantages of a PTO strategy for businesses, such as workers taking time off more frequently, or coming into work when ill because they regard their PTO allocation as 'vacation' days and don't want to waste them with sickness, a well-designed PTO policy can offer great benefits by ensuring employees are happy and productive, which should outweigh any potential drawbacks.
1. Improved health
A key benefit of having a clear PTO policy is the effect it can have on employees' health. Taking time off to recover after a particularly stressful period without worrying about eating into precious sick days helps reduce burnout and disengagement. It can also be good for physical health, as stress and long working hours are linked to a range of conditions such as heart disease. Therefore, offering more flexible time off now could save much longer-term sickness absences in the long run.
2. Enhanced work-life balance
Opting for a PTO over separate vacation, sick and personal allocations also allows your employees to be more flexible and support their work-life balance, which in turn leads to higher morale and greater loyalty to their employer.
3. Reduced sickness absences
At the same time, it can prevent employees from calling in sick unnecessarily, as they can use the time at their own discretion. This could be to accommodate doctors appointments, family commitments, or even allowing them to recover from Superbowl Sunday celebrations - traditionally a popular time to take a sickie.
Because the reason for the time off is irrelevant to their employer - as long as sufficient notice is given - employees will feel under less pressure to justify how they use their allocated time. This means they’re likely to have a more positive relationship with their employer, boosting both productivity and staff retention.
Make sure employees use their allocation
However, having a clear PTO policy that employees understand and are enthusiastic about won't deliver the expected results unless workers are actually using it, and this is something that can be more of a challenge than you may think.
In fact, workers in the US often fail to make the most of the time off they're entitled to, with research from Glassdoor revealing the average employee only uses around half their allocation (54%), with just 33% taking all of their allocated time off.
While this might seem like good news for businesses, as they have to spend less on vacation and sick pay, it can be harmful in the long run as workers run the risk of burnout - especially if they feel they’re under pressure to be at work as much as possible.
To avoid this, it's important for HR departments to encourage people to take their full allocation. This means promoting an environment where time off is treated positively.
For example, if senior management spend all their time in the office, this creates a belief among other employees that they’re expected to do likewise. Therefore, it's a good idea to start at the top if you want to change your workplace culture.