Time & Attendance
Prevent Call Outs
Implementation & Launch
By Gabriella Fundaro
Mar. 6, 2023
Workers are finally starting to take more time off for vacation and rest, a pretty significant shift in America’s always-hustling working culture. According to a Korn Ferry survey in 2021, 79% of workers said they planned to use more vacation days that year than in years past, and 82% said they would appreciate more vacation time in our post-pandemic world.
Paid time off (PTO) has always been valued by employees. 76% of American workers feel that it’s very important their company provides PTO. Paid sick time (74%) and paid holidays (74%) are also very important among workers.
Employers can retain more workers, lower stress levels, and improve productivity among their workforce by developing a clear and fair PTO policy. But there’s no “one size fits all” approach to adopting the perfect plan for your company — you’ll have to sort out the right policy based on your workforce needs, then make sure you’re calculating time off banks correctly to help each worker get the time they’re entitled to.
There are a few different reasons why an employee might use their PTO. Depending on your company policy, they might use any available PTO day for any of these reasons, or they might have an allotment of days for each category.
You can allocate time off to your employees using a few different systems. In a traditional PTO format, workers accrue time off based on their hours or days worked. But more employers these days are leaning towards more flexible time off policies.
With this type of policy, your workers will accrue time off based on every hour or day they work. The accrued time off will get added to their PTO bank, and when they have enough hours banked, they can take time off. You can choose to lump all types of PTO together or distinguish between vacation and other types of PTO.
Usually, employees accrue different types of PTO at different rates. For example, for the year, your policy might grant 10 days of vacation, five sick days, five bereavement days, and three personal days. Then, for each 40-hour workweek, employees will accrue their vacation time faster than their sick time, bereavement leave, or personal time. Employees with more years of service might also accrue more paid days of leave per year.
With an accrued time off policy, employees have to wait until they have enough time banked in order to use their PTO. That means that you can’t just look at scheduling needs when weighing PTO requests — you’ll also have to track each worker’s banked PTO to make sure they have enough of a balance.
In an unlimited time off system, there’s much more flexibility for employees to take days off as they wish. There is no set number of days in an unlimited PTO system. Instead, employees can take off as many days as they’d like, for any reason, as long as the time off is approved by the company and they’re still fulfilling their individual responsibilities.
This flexibility can be a benefit to employees. There’s usually a level of trust that workers will take the time they need to stay rested and attend to personal matters while still remaining productive at work.
However, an unlimited PTO policy also comes with some severe drawbacks. Studies show that employees on average take less time off under an unlimited policy than those who operate under a traditional policy. This is most likely due to a sense of guilt and other unspoken, toxic workplace stigmas around taking leave.
Just like in a traditional accrued time off structure, managers and company leadership still have to approve time off in an unlimited policy. If you opt for this type of format, the difference is you won’t be looking at the hours available in an employee’s time off bank. You’ll still typically review factors like workforce coverage, scheduling needs, and productivity before you approve any leave.
Under an unlimited PTO policy, you also don’t have to pay employees for the time off they’ve accrued when they exit your company. In a traditional PTO system, you do owe workers for any unused PTO time that they’ve banked during their tenure. When an employee leaves, they’re usually entitled to a payout of the days of PTO they accumulated.
Small-business and startup consultancy Bizfluent notes that calculating PTO by pay period allows organizations to evenly distribute an employee’s time off accumulation throughout the year. Organizations with hourly or part-time employees should consider providing PTO based on the number of hours worked. When an organization calculates PTO hourly, it allows employers to award less PTO for hourly employees who do not report to work (for whatever reason) or for part-time employees who do not always work the same number of hours in a pay period.
One metric that employers can follow to calculate PTO is to divide the annual PTO hours by annual work hours. For example, if an hourly employee earns 80 hours of PTO each year and works 40 hours a week, or 2,080 hours per year, divide 80 by 2,080. That works out to an employee earning 0.038 hours of PTO for each hour worked.
The PTO formula is:
Hours of PTO / hours worked each year = hours of PTO earned per hour worked
So in our above example, the organization’s PTO formula for this employee would be:
80 hours / 2,080 hours = 0.038 hours of PTO earned per hour worked
Even if you set a clear PTO policy, there are bound to be situations or employee requests that fall outside of the policy that you’ll still have to balance. The key is to treat all employees fairly and accurately track PTO balances so you know exactly where you stand.
A sick employee has already used all their days.
Combining sick leave and vacation into one PTO category can lead to unplanned consequences for employees. If a sick employee has used all their PTO days, they might feel compelled to show up ill and risk infecting co-workers.
Help employees plan for this by offering guidance during onboarding or in posts throughout the year via internal communications about the importance of banking some PTO for sick days. As an example, advise employees to consider paid time off as five days of vacation, four sick days or an unplanned emergency, and one day for a special occasion.
A new employee needs to use PTO days before accruing them.
Companies often hire employees who have previous personal commitments for which they need time off after being hired. Prospective candidates often are honest and upfront about this as the hiring process progresses.
Since most policies establishing how to calculate PTO makes it hard for employees to take time off in the early months of their employment, many employers will allow employees to “borrow” their PTO. Allowing 40 hours of borrowed time gives an employee a full week off. To avoid lump accumulations and to more accurately calculate PTO, companies can implement earning PTO incrementally with each pay period.
If you’re allowing your employees to borrow ahead on their PTO plan, you’ll need to accurately track the hours borrowed. You’ll also need visibility into the rest of your attendance and scheduling to quickly identify and resolve any coverage issues, especially for unplanned absences, like a death in the family.
Make sure that your paid time off policies, including examples of how your organization calculates PTO accrual and who is eligible for the PTO program, are clearly defined in your employee handbook.
Leave management is a crucial tool for staffing management as well as recruiting and retention, especially for hourly workers. Unlike a salaried desk job, when workers in the service industry request time off, those shifts can’t go uncovered. Automatically adjusting schedules helps provide you with enough coverage and keeps workloads manageable for the rest of your workforce.
You can manage your employee leave and availability with our intuitive employee scheduling software that makes it easy to manage time off by automatically applying changes to schedules and timesheets.
federal law, minimum wage, pay rates, state law, wage law compliance
Staffing Management4 proven steps for tackling employee absenteeism
absence management, Employee scheduling software, predictive scheduling, shift bid, shift swapping
Time and Attendance8 ways to reduce overtime and labor costs
labor costs, overtime, scheduling, time tracking, work hours
Come see what we’re building in the world of predictive employee scheduling, superior labor insights and next-gen employee apps. We’re on a mission to automate workforce management for hourly employees and bring productivity, optimization and engagement to the frontline.