Does Your PTO Policy Need Updating?

Paid time off (PTO) policies need to align with the dynamic and ever-changing business landscape. Generous PTO policies help companies attract top talent, but many aren’t flexible enough to keep employees for the long term. Businesses need to balance employee desires for work-life balance with company productivity and resource availability. These competing interests aren’t easily navigated.

Updating PTO policies can inject new life into the workplace and restore fading worker morale. However, it takes meticulous planning and forethought to do it effectively. This article provides an overview of PTO, discusses the benefits of updating these policies, and reviews common concerns businesses have regarding paid time off policies.

Traditional leave policies

Traditionally, employers separated employees’ days off into separate categories. Each category had its own designated number of days of permitted absence. That allowed employees to, for example, take five days of vacation time, three days of sick leave time, etc.

Under that system, employees enjoyed much less flexibility with their time off. For example, the rules seldom distinguished between vacation time and a personal day; personal days were often counted as vacation days or vice versa. Plus, many employees needed to produce an actual doctor’s note to have a sick day counted.

This system presented several problems, including:

Employees rarely received sufficient vacation or personal days because sick days took up the bulk of their PTO.
The need to track multiple time off categories created an additional and unnecessary administrative headache.
It seemed to remove employee autonomy and lower employee morale.

The need for a more flexible solution, one with less micromanagement, was clear to many employers. This led to the popularization of PTO, which simplifies how employees take time off.

The PTO difference

Paid time off does away with the old categorization of leave days, taking a minimalist approach to the matter by aggregating all leave days into a single account. Employees are free to withdraw a leave day from their account whenever they wish and for whatever reason. This system lets employees take time off, receive their regular pay rate, and eliminates administrative overhead simultaneously.

The chief difference here is the employee’s flexibility. Rather than explaining how they intend to use their leave, employees under a PTO policy don’t need to provide any explanation at all if they prefer. There is a fixed quota of days; employees may draw from that quota for any reason, and that’s all there is to it.

The PTO system also has many advantages for the company itself, namely that it:

Raises employee morale by empowering them to exercise autonomy over their days off.
Provides an attractive “lure” for prospective employees.
Eliminates the need to track unnecessary leave categories, as they are all combined into one.
Fosters an office environment that prizes work-life balance.

Beneficial PTO policies like these can also raise employee engagement and retention. Many of today’s employees value work-life balance as a means of enhancing their productivity. A company can show employees it appreciates their time by crafting an effective PTO policy.

Managers should also promote the usage of PTO among employees. In the event of employee termination, it can avoid having to make a higher payout because of unused PTO.

Common questions businesses have about PTO

Many employers naturally harbor some concerns about PTO policies. While employees are interested in work-life balance, employers are usually more interested in the “work” side of the equation. The potential impacts of PTO on employees’ productivity worry employers, as does the potential for PTO abuse.

Many employers are concerned that PTO incentivizes employees to “work through” their illnesses so as not to take a day off unnecessarily. This can have unhygienic consequences for the office. For the same reason, many feel that PTO leads to fewer days off overall than the traditional system.

To avoid confusion, companies must clearly outline their PTO policies in the company handbook or policy statement. These handbooks must articulate clearly and concisely:

Whether the company will pay unused vacation days if the employee should leave the company.
Whether the employer will credit employees for PTO if their time off coincides with a federal holiday.
The number of days off allotted to newly hired employees.
How to distribute unused PTO in the event of an employee’s termination.

Explaining these policies in detail can avoid confusion later. While some of these details are up to the employer’s discretion, companies may wish to advertise their PTO policies as part of their recruitment process. A strong policy can bring employees to the business’s front door who might otherwise have gone elsewhere.

Implementing PTO policies requires careful consideration. Managers may wish to solicit employee feedback about current PTO policies before making significant changes. Distributing employee surveys or requesting anonymous feedback can help companies devise beneficial policies for themselves and their workforce.

Similarly, there’s no reason to think of these policies as being fixed in place. Businesses should regularly review their PTO policies to ensure they’re meeting their needs.

These reviews can revolve around a few selected metrics, such as:

The actual PTO usage level: Are employees using their time off or letting it add up?
The rate of PTO accrual: If PTO days accrue too quickly, employers may wish to introduce changes to their policies.
The amount of time administrators spend reviewing PTO: This can quickly become a drain on efficiency if not carefully monitored.

Unlimited PTO

Think of PTO almost like an open-door policy. It requires mutual trust between employees and their employers; therefore, unlimited PTO isn’t suitable for every working environment. Using an unlimited PTO policy means employees have no quota whatsoever on the number of days they can take off.

Under this system, the employer’s sole interest is for employees to succeed at their jobs. As long as that’s accomplished, they can take as many days off as they want — in theory. This system certainly makes employees feel trusted and valued, but it can also be open to abuse.

Collaborating with a dedicated human resources company can help companies to make these decisions.

Collaborating with Resourcing Edge

Working with a company like Resourcing Edge can help businesses jump-start their PTO policies. Rather than sitting down to perform such time-consuming (and tiring) leg work on their own, they can outsource these operations to an experienced human resources firm. It’s a more productive use of company time and can streamline HR output.

Tailored PTO policies

Resourcing Edge specializes in custom-fit HR solutions for companies of all sizes. This process begins with a complete audit of a company’s existing PTO policies, including the following:

Method of tracking accumulated leave
Transparency, particularly in terms of how well employees understand the policies
Level of compliance with existing regulations regarding PTO

Accounting for these and other factors, companies working with Resourcing Edge can derive updated policy solutions. It’s an iterative process that strives to balance the desire for employee satisfaction with the company’s need for efficiency. Over time, this can make a more prosperous work environment for all parties.

Superior software-based record-keeping solutions

Working with Resourcing Edge means gaining access to superior HR software solutions. Migrating current HR procedures into the digital realm can lead to improved record and time-keeping apparatuses for the company. Software solutions reduce the possibility of making both minor mistakes and costly payroll errors.

These systems can automate much of the record-keeping process. This means better data management because it eliminates the need for manual data entry, but it also supports the organization’s scalability. HR software is flexible enough to expand its uses in perfect sync with a company’s growing revenue, payroll needs, and employee headcount.

Compliance

Resourcing Edge understands that accurate data entry is the key to compliance. PTO errors can lead to major legal penalties, which is why Resourcing Edge automates accrual calculation via software. The advanced record-keeping apparatus also preserves vital documents in case regulatory authorities ever ask for them.

Data security and privacy are another top priority. Compromises in employee data can open companies up to legal liability. An experienced team like Resourcing Edge uses cybersecurity best practices to protect the integrity of employee data and keep it out of the hands of bad actors.

The benefits of updated PTO policies are clear

Thoughtful PTO policies strongly influence employee satisfaction and efficiency. An overly rigid policy toward time off can hinder a company’s ability to recruit highly competent and loyal employees. In a competitive job market, other companies with more generous PTO policies can siphon away leading talent with little effort.

That’s why developing a more comprehensive PTO policy is so critical. Resourcing Edge is an experienced human capital solutions firm that knows how to cultivate a healthy work-life balance. Companies looking to use superior PTO policies to enhance their employee engagement and productivity should contact Resourcing Edge today.

Sources:

Business News Daily: “PTO Policies: Which Is Best for Your Business?” February 2023.

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Jami Beckwith

Director of Human Resources at Resourcing Edge

HR Director at Resourcing Edge with 20 years of experience in Human Resources, focus areas include:employee relations, compliance, organizational development, performance management, and talent/leadership development.Her goal is to provide innovative solutions and services exceeding client expectations.