Paid Time Off (PTO)

What is paid time off (PTO)?

Paid time off (also known as PTO or personal time off) is compensated time away from work provided by an employer to employees to use as they see fit. PTO is often measured in hours and can be classified differently for absences like sickness, vacation, and personal time.

Paid time off isn’t the same as maternity leave, FMLA leave, furlough, unpaid leave, or any other leave which may be legally protected or unpaid. Paid time off policies generally fall into two categories—traditional and unlimited.

Traditional

Traditional PTO policies are usually issued at intervals (e.g., monthly or quarterly) to new employees, with a limit that may increase as an employee spends more time with an organization.

Some businesses may also have PTO accrual systems in place. PTO balances are then tracked by a manager or administrator, either manually on paper or in spreadsheets, or with software designed for vacation tracking or time tracking.

Unlimited (or discretionary)

Unlike traditional PTO, unlimited or discretionary PTO policies generally don’t involve issuing trackable hours to an employee.

Rather, they usually state that time off is available at the discretion of the employer (often the employee’s manager), who is expected to approve requests if they determine the employee is in good standing and has no conflicts that would interfere with their absence.

How are unlimited holidays managed?

Some organizations using unlimited PTO policies still track the number of hours or days an employee takes off for accounting or approval reasons.

This, plus the fact that a personal day or personal time off requires manager approval, leads some people to prefer “discretionary” as a more accurate name for this type of paid holiday policy, as “unlimited” can be misleading.

Research from SHRM suggests employees of organizations with unlimited PTO policies use less vacation time on average (16 days) than employees with limited PTO (14 days). This may be due to peer pressure or self-imposed pressure to appear dedicated.

While some organizations may view a reduction in time off as a benefit of an unlimited PTO policy, others believe that PTO is critical to employees’ mental and physical health, and state this as a reason for instituting a limited PTO policy.

Is personal time off the same as paid time off?

The terms personal time off and paid time off are often used interchangeably, but they vary slightly.

Paid time off usually encompasses sick days and personal time off, so personal time off is just one aspect of PTO. Some companies also include other days off in their PTO, such as time for appointments and work-related education.

Can a personal day off be denied?

While it’s usually against the law for an employer to deny a sick day to someone unable to work because of illness or another medical condition, the employer can legally deny someone a personal day.

Businesses should be mindful of their attitudes towards sickness within the workplace, as negative approaches can lead to sick guilt among employees, which can hinder health and safety.

However, they must have a good reason for denying requested time off, such as if another team member has already requested the same dates or if the employee already agreed to work on those dates. The only way an employee could dispute these circumstances is if they’ve signed a contract stating that they are allowed to take this type of day off.

Can a boss ask why you're taking a personal day off?

There aren’t any laws requiring employees to explain to their boss what they are doing when they request their personal days‌ off. As the name implies, personal days are  personal.

A boss may inquire about what an employee is doing on a day off, but the employee isn't obligated to divulge details. It’s also against the law for a boss to require a doctor’s note for an employee to take a sick day.

To better manage employee days off, companies can look into implementing an absenteeism policy.