4 PTO Policy Examples HR Pros Need to Know [Free Download Inside]
Have you ever felt guilty after calling in sick or scheduling vacation time? Rest and recovery shouldn’t feel like a bad thing, but if it has, you’re not alone. US workers are half as likely to take vacation time than they were 40 years ago, and nearly 90% of employees feel guilty about taking sick leave.
Yet of all the benefits businesses offer, paid time off (PTO) is the perk people think about the most. It’s top of mind for planning family trips, scheduling doctor’s appointments, and figuring out how to combat burnout during busy seasons. Potential job candidates also look at time-off benefits. So a generous PTO policy can be a great selling point for attracting new talent.
A PTO policy establishes the rules and expectations around taking time off. And while it should certainly fit your organization’s needs, it’s equally important for it to help employees maintain a healthy work-life balance. It lays the groundwork for a company culture that either welcomes time-off requests or perpetuates guilt around taking time off.
In this guide, we provide an overview of common time-off plans, explore how they contribute to a healthy workplace culture, and get you started with a downloadable PTO policy example. And once you’ve created your PTO policy, BambooHR’s award-winning HR software can help make it easy to track time off, approve requests, and view PTO balances in real time—no calculator required.
What Is Considered a "Good" PTO Policy?
A PTO policy should have clearly defined standards to adequately support your workforce and maintain business continuity. It should be inclusive to protect against tricky situations or discrimination, and easy to understand to proactively prevent miscommunication.
But what makes a good PTO policy?
A good PTO policy keeps employees and management in mind. Prioritizing transparency at both ends helps ensure time-off requests run like clockwork. Here are some things teams at all levels want to know:
- Number of PTO days per person
- Accrual rates (e.g. per service years or pay period hours)
- Expiration dates or rollover policies
- Best practices for requests
- Approval processes for requests
- Tracking methods
- Cash-out policies for unused time
- Federal and state laws regarding paid and unpaid leave
- Resolutions for scheduling conflicts
Good PTO policies also consider what today’s workforce truly wants. For instance, research shows younger employees look for companies with more empathy. They want to be recognized as individuals with needs outside of the office and rewarded for their hard work with more time off and flexibility. This means your PTO policy can boost company appeal and job satisfaction.
When developing your guidelines and putting them into practice, consider their impact on the company’s overarching attitudes around rest. A well-crafted PTO policy empowers people to take advantage of their hard-earned benefits and nurtures a positive attitude around time off from the top down.
Free Resource: PTO Policy Example and Best Practices
How much time off is too much or too little? What types of PTO should you offer? In most companies, it's up to HR pros to answer these questions, build effective policies, and solve other time-off challenges.
We’ve compiled a list of questions and advice—plus a real-world PTO policy example—to help you develop the perfect PTO policy for your company, including:
- Building a solution that fits the needs of your employees and your business
- Refining your larger compensation package.
- Handling any PTO situations that arise.
Download BambooHR's PTO Policy Builder
Planning your PTO policy just got easier! Our free resource will walk you through the best practices that power effective PTO policies.
4 Standard PTO Policy Examples
Businesses use different labels for the time off employees can take. This helps people plan for specific events during the year, whether scheduled or unexpected, and maximize their benefits in organized ways. It also helps companies track absences in detail.
If this is how your leave-management strategy works, include a handy explanation that outlines the types of time off available. A standard PTO policy may include:
- Vacation time: Designated time away for rest and rejuvenation
- Sick time: Reserved for illnesses, appointments, and other health-related absences that may be affected by state and local laws
- Parental leave: Supports parents and caregivers with new babies and children and is guaranteed in some US states
- Floating holidays: To be used at employees’ discretion for religious, cultural, and other observances that are separate from standard company holidays
- Bereavement leave: Time for employees to prepare for the funeral, handle estate tasks, and more after losing a loved one that can be guided by some states’ bereavement laws
- Bonus time: Any volunteer days, birthdays, sabbaticals, or other creative benefit ideas that can be appealing value props
Aside from specific types of time off, many PTO policies establish overarching rules accounting for how time is earned, the amount granted, and other factors. Here’s what that might look like for your organization.
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PTO Accrual Policy
Employees earn time off at a set accrual rate in a PTO policy. Some companies award PTO days all at once (at the start of the calendar year or on an employee’s anniversary date) and increase this number based on tenure. Others grant a certain number of hours per pay period (e.g. weekly, biweekly, monthly) up to a maximum. Here are a couple of accrual examples:
Biweekly PTO Policy Example
Let’s say you earn three weeks of vacation time (15 days) each year. Use this formula to figure out the number of PTO hours earned per pay period:
Total PTO hours per year / number of pay periods per year = total PTO per pay period
So 15 vacation days translates to 120 PTO hours. And if you receive a paycheck every two weeks, here’s how to figure out your PTO accrual rate:
120 PTO hours per year / 26 pay periods per year = 4.6 PTO hours per pay period
Hourly PTO Policy Example
The example above works for full-time employees. But if you’re an employee working part time or irregular hours and want to know how much time off you’ve accrued, you can start by calculating how much PTO a full-time employee earns per hour.
Using the same numbers from the previous example, here’s what that would look like:
4.6 PTO hours / 80 hours per pay period = 0.058 hours (the PTO accrual rate)
To figure out how much time you earn after working 20 hours in a week, simply multiply the number of hours worked by the PTO accrual rate:
20 hours worked x 0.058 hours = 1.2 hours of PTO
The key to this approach is accuracy and consistency. It helps to have a handy chart in your employee handbook where everyone can see how PTO accrues.
Unlimited PTO Policy
An unlimited PTO policy doesn’t cap the amount of time off employees can take. They simply request time off, and it’s granted at the discretion of management. Generally, employees have the freedom to take as much or as little PTO as they need. For this plan to work, companies set clearly defined guidelines and lead with a fair amount of trust. Some things to consider for an unlimited PTO policy include:
- Eligibility requirements
- Approval processes for requests
- Resolutions for scheduling conflicts
- Performance and/or productivity expectations
Under this plan, companies can worry less about paying for unused time when someone retires. And employees can feel less stressed about conserving their PTO allowance. While overuse might seem like the biggest concern, sometimes underuse is the real issue. This is where intentional policy language can help clear up any ambiguity and promote the best ways to use unlimited PTO responsibly.
Flexible PTO Policy
A flexible PTO policy eliminates the distinction between vacation days, personal days, and sick time. Instead, it lumps them all together under a general allowance employees can prioritize any way they want. For instance, flexible PTO can be used for vacations, mental health days, illnesses—and virtually any other reason.
It sounds similar to unlimited PTO, but each person gets a maximum amount. As long as they adhere to the company’s time-off request approval process and avoid scheduling conflicts, they’re allowed to take advantage of their paid leave as they wish.
Does the Family and Medical Leave Act Guarantee PTO?
The Family Medical Leave Act (FMLA) does not guarantee PTO—only unpaid leave. Eligible employees may take up to 12 workweeks off for family and medical reasons without risking losing their job. Under this law, employees may choose to use (or be required to use) some of their accrued vacation, family, or sick time for this period.
It’s worth considering this law when crafting your company’s PTO policy because FMLA guidelines can overlap with paid leave management. This way, you’ll be prepared when someone needs to use protected leave time.
Should You Have a PTO Payout Policy?
The short answer: It depends. PTO payout (or PTO cash out) is when workers are directly paid for any unused time off in the bank when they retire, resign, or are let go. These policies vary by organization and location. Some states view accrued PTO as taxable wages and have PTO reimbursement laws. So, how you handle it at your company largely depends on where your business is located.
On top of that, special rules apply to employers with remote employees. Even if a business is headquartered in a state without a PTO payout law, if an employee works in state with one, they’d be entitled to a payout.
Can an Employer Take Away Earned PTO?
Yes, it’s possible for an employer to take away earned PTO. If the law doesn’t require a payout of unused time, employees essentially forfeit the time when they leave. And use-it-or-lose-it PTO policies—which put an expiration date on accrued time—are another way earned time might be subtracted.
In certain cases, employers may even be able to take away PTO based on performance. A 2023 court ruling decided employers can dock PTO without violating the Fair Labor Standards Act (FLSA), meaning it doesn’t violate the salary basis requirement for exempt employees. But before going this route, it’s a good idea to consult your legal team to make sure your policy doesn’t violate your workers’ rights.
PTO Policy Best Practices
Remember: A successful PTO policy works for your employees—not against them.
At the end of the day, the best PTO plan you can put into action is one empowering your employees to take the time off they need with enough structure to manage company-wide scheduling effectively. There’s no one-size-fits-all solution for time off. You’re generally free to create a custom PTO policy for your organization as long as it follows federal or state laws.
Start by thinking about your workplace community and the things employees may find valuable. It’s also a good idea to research common PTO policy examples for your industry or business model and consult your leadership team for insights. Once your policy is complete, talk to management about how they can promote this policy positively.
Together, you’ll lead by example and set the tone for how PTO is handled. Modeling what it looks like to take full advantage of your fresh, new PTO policy is a great way to get the ball rolling and encourage a healthy mindset about taking time off.
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