If you’re thinking about offering it to your employees, above and beyond what you may (or may not) be legally required to provide, here are some things to consider.
Everyone needs time off from work, but not everyone’s able to take it. Paid time off helps a lot. People are better able to take the time they need without worrying about a smaller paycheck. Employers demonstrate to their teams that they value them as whole people and recognize that time away from work is important as well.
But implementing and managing paid time off isn’t a walk in the park. If you’re thinking about offering it to your employees, above and beyond what you may (or may not) be legally required to provide, here are some things to consider:
What Does the Law Say?
No federal law requires that private employers offer paid vacation time, volunteer time, or company holidays, so you don’t have to worry about that. However, if you operate in a state or locality that requires paid sick leave, paid time off, or any other kind of leave, make sure your paid time off policies comply with the relevant laws. If you’re not sure what laws may apply, check out the Leaves & Time Off section of the platform. Keep any legal requirements in mind when reviewing the considerations below.
What Can Employees Take Paid Time Off For?
Some employers may opt for simplicity by providing a single paid time off (PTO) bank and telling employees they can use it for whatever they want. A consolidated bank of time provides employees with the flexibility to take their time as they like, sparing them the need to come up with a reason for requesting time off and you the task of tracking different types.
There are, however, advantages to spelling out what employees can use paid time off for and having separate banks for each type of time off, especially if you’re in a state that mandates any kind of paid leave. First, having separate banks makes it easier to track whether you’re in compliance with applicable leave laws. These typically require employers to offer a certain number of hours based on how much an employee works or what they’re taking leave for. Second, identifying different types of paid time off tells employees that those are legitimate and good reasons to take time off. People should feel empowered to take time to grieve after a loss, volunteer after a local disaster, or take a planned day off simply to extend the weekend. Third, it can help encourage employees to stay home when they’re sick. By having some paid time off designated as paid sick time, employees under the weather won’t feel like they’re digging into their allotted vacation time when they call in sick.
If you’re unsure what types of paid time off to offer, but you’re planning to offer it in some form, consider surveying your employees on what types of leave they’d like.
How Do We Provide Employees with Paid Time Off?
There are two basic ways to provide time off for your employees. The first is a lump sum at the beginning of the year (calendar or fiscal). The second is through an accrual system.
The lump sum method is easier to manage and useful for employees who like to take their vacations toward the beginning of the year. The main downside is that employees may use up all their time early in the year and then quit, taking a full year’s worth of paid time off without having “worked for it.” But of all the costs that come with turnover, their use of paid time off is probably going to be very low on the list.
The accrual method, in which employees earn time off throughout the year, avoids that problem, but it can complicate tracking and may restrict the freedom of employees to take time off when it suits them best.
How Much Paid Time Off Should Employees Get?
Now we come to the more difficult question, if for no other reason than you have so many options. According to Forbes, the average U.S. employee gets 11 paid vacation days, 8 paid sick days, and roughly 7 paid holidays. Typical amounts vary based on tenure, industry, geographical area, and the pressure of competition. It would pay to conduct a little research before setting any amounts for your employees.
You could instead decide not to worry about specifics and just give your employees flexible or “unlimited” PTO. (We recommend against calling these plans “unlimited” as that’s rarely accurate in practice and can be confusing to employees.) With flexible PTO, employees have no set number of days off they can take, provided their time away doesn’t jeopardize their work or disrupt business operations, but this can be a blessing and a curse. Flexible plans like this are nice for the freedom they bring. Employees can request time off when they need it without worrying about going over a limit or having to fit activities in whatever time they have remaining. On the flip side, without hard limits, it can be difficult for employers and managers to set expectations around how much time is appropriate. Employees, fearful they’re taking too much or not viewing it as an employment benefit that needs to be “used up,” may well ask for less time off than they otherwise would.
How Far Ahead of Time Should Employees Request Paid Time Off?
While some reasons for leave may not allow requesting time off in advance—sick leave or bereavement leave, for example—it’s perfectly fine to require employees to request vacation time in advance. Two weeks beforehand is common, but you can shorten or extend that period of notice depending on how much flexibility you would like employees to have and how much time they and their teams need to prepare for their absence. You can also ask for more notice for longer absences, while still allowing employees to ask for a day off “last minute” if it turns out their schedule is clear.
When and How Should Requests Be Denied?
There will be occasions when you’re not able to approve a request for time off. You may not have sufficient coverage or the employee requesting time off may have unfinished projects that can’t be put off. There may be other reasons too.
To avoid hurt feelings, unexpected denials, and the appearance (or reality) of discrimination, it’s best to have clear, objective practices around approving and denying requests so employees understand the criteria used. That criteria may be the order in which requests were made, the seniority of the employees requesting PTO, or manager discretion based on team needs and performance. Of course, make sure employees aren’t denied leave to which they’re legally entitled.
Even if no leave laws apply, take care that no protected groups are disproportionately denied their requests for paid time off. If Black women or individuals over 40, for example, are denied leave more frequently than members of other groups, you could be looking at a discrimination claim.
How Should Employers Respond to Employees Not Taking All Their Paid Time Off?
It’s likely that you will have employees who don’t use all their allotted or accrued paid time off during the year. This is actually very common—so is working while on PTO, unfortunately—and while some employers might see this as a good thing, unused or underused paid time off may be a symptom of too much work and too little time to do it, which will only compound the likelihood of burnout.
One option to help employees take their PTO is to allow them to roll over a certain amount of unused time to the next year. This at least gives them the option to use their time later if they aren’t able to use it during the current year.
Another option is to require employees to take a certain amount of PTO during the year. This practice is not very common and comes with logistical challenges, especially if many employees haven’t taken their mandated time by the end of the year.
Regardless of what you decide, if you’re concerned that employees are not able to take sufficient time away from work, we recommend looking into why that is. Simply setting up a generous PTO program doesn’t by itself establish a healthy work-life balance. Employees need the freedom to take the time that’s right for them and actually get away from work. That means addressing factors that may be deterring employees from requesting PTO they’re eligible to take.
