Should your business offer a paid time off policy?

Paid time off, or PTO, is something that employees increasingly expect. Nearly three-quarters of American workers in 2021 say paid time off for vacations, holidays, and sickness is very important to them, while more than 60% would turn down a job if the company didn’t offer a PTO policy.

Labor market expectations are shifting when it comes to paid time off, so there’s never been a better time to consider implementing a paid time off policy at your business. And meeting the expectations of job seekers while aligning with your own business objectives can be beneficial to all parties. Here’s what you need to consider before making the call.

The basics of what paid time off involves

There is no federal law saying employees can have paid time off from work. In the words of the Department of Labor, “These benefits are matters of agreement between an employer and an employee (or the employee’s representative).” However, the United States is now the only advanced economy not to mandate paid leave. And as workers return to a labor market shaken up by the pandemic, this discrepancy is becoming more of an issue. As pro-PTO advocates are fond of pointing out, even the ancient Egyptians had paid sick days.

PTO and the law

Despite the United States lagging behind when it comes to nationally mandated PTO compared to other countries, 13 states plus Washington, D.C., have passed their own laws related to paid time off for illness. State laws can also dictate how PTO is accrued. For example, in Connecticut, the first state to impose PTO laws in 2011, companies with more than 50 employees must offer one hour of sick leave for every 40 hours worked, up to a maximum of 40 hours per year. You can see an up-to-date overview of which laws apply in which states here.

PTO banks can free up managers and staff

An increasingly popular way of implementing paid time off is via a PTO bank. With a PTO bank, employees have a number of hours or days which they can use whenever they need, for any purpose. The amount of PTO in the bank generally increases the longer a person stays with the company – 10 PTO days per year is the U.S. average.

The benefits of implementing a paid time off policy

Setting up a PTO bank has obvious appeal to employees, but it can benefit employers, too.

Saves managers’ time: As long as time is booked in advance (with the exception of sick days, where advance notice may not be possible), there is no need for the employee to explain why they are taking time off, and therefore no need for managers to spend time deciding if requests are justified.

Builds trust: Managers don’t need to know if someone is taking a day off for a hospital appointment or just to catch a new movie on opening day. You’re treating employees like responsible adults, not schoolchildren who need to justify themselves.

Reduces unauthorized absence and lateness: Having a bank of PTO means employees can plan ahead for everything from vacations to appointments without losing out, so work and life aren’t in conflict with one another.

Reduces deception: 96% of U.S. workers have lied to get out of work. While it’s impossible to completely eliminate this kind of time theft, with PTO, employees don’t need to spin a story to take time off. They just use their time.

The potential problems of implementing paid time off

As with any dramatic change to workplace culture, implementing PTO is not without problems.

Earning more PTO is hard: There is a generational gap regarding employment tenure that can impact workers’ ability to expand their PTO allowance. For people over 55, the average time spent at a job is almost 10 years, while for 25- to 34-year-olds, it is now just 2.8 years. This places a soft ceiling on how much PTO new employees can enjoy, which can lead to difficulty in recruiting staff and resentment and decreased motivation for newer employees. Some companies now offer 15 days of PTO as standard as soon as employees start to level this playing field.

PTO goes unused: In the U.S., employees are bad at using their allotted benefits – they often don’t use their time off and then feel burned out and aggrieved if they can’t roll those days and hours over to the next year. Ninety percent of U.S. workers say they have come to work while sick rather than take a sick day for fear of losing wages. Educating staff that PTO can and should be used for all sick days, vacations, and any other situations is key.

Time off requests need fair treatment: Not everyone will be able to take their desired days off – there’s often a rush to take time off at the end of the year, for example, and some people will have to miss out to keep the company working. Setting your company calendar so that accrued PTO expires in the spring rather than on New Year’s Eve can help to prevent this.

Unlimited PTO isn’t a magic bullet: The idea of unlimited PTO is proving popular with newer companies and office-based startups. The concept may seem appealing to employees, but it has drawbacks. Most workers on unlimited PTO schemes don’t take advantage of their unlimited time off, take fewer days than they would have had anyway, and miss out on payments they would have received for unused PTO at year-end as a result.

A paid time off policy isn’t essential for your business – but it could be soon

The idea of a traditional eight-hour workday at a job you work for decades, with two weeks of vacation and national holidays every year, lingers in the popular imagination but doesn’t reflect the reality for millions of U.S. workers in 2021. Employees are more alert than ever to the benefits they want, with 57% now saying that paid time off is a Top 3 priority when applying for jobs, ranking it alongside perennially popular benefits like health insurance and a pension.

With no legal requirement to do so, it’s understandable that not every business will want – or be able – to implement a paid time off policy right now. But between legislation and staff expectation, it may not be optional for much longer. Whether you think the time is right to introduce PTO to your company or prefer to adopt a wait-and-see approach, Workforce.com’s time and attendance software can help manage time off requests quickly and painlessly.