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Paid Time Off Leave vs. Traditional Leave Banks: The Pros and Cons

Absenteeism is costly to employers. However, paid time off is key to recruiting and retaining good employees. Everyone needs time off to rest and recharge, as well as to care for an ill family member or their own illness.

Over the years, many companies have gone from offering separate vacation, sick and personal leave banks to combining all time as Paid Time Off, commonly known as PTO. If communicated properly, a PTO bank of leave time can benefit both employers and employees.

Benefits to Employers

  • PTO banks are easier to administer and track than traditional leave banks since all paid days off are debited from a single bank of hours.
  • Company leadership will spend less time managing their employees’ time off since they only have to manage one bank of time instead of two or three banks of time.
  • PTO plans often reduce the occurrences of unscheduled time off which can be costly when considering lost productivity, overtime paid to employees who must cover for others and morale issues among employees who are forced to unexpectedly cover another employee’s workload.
  • Employees who can exercise more control over their time off are more likely to pre-plan their time off.

Benefits to Employees

  • PTO programs provide employees with flexibility and privacy.  There is no need to explain the reason why they are requesting time off. Each employee’s needs are unique and a PTO plan meets these individual requirements.
  • Employees feel empowered to take time off as they see necessary. This fosters a culture of trust between employees and supervisors.
  • Employees who rarely take a sick day can use their PTO allotment on vacation if that is what they choose to do. This flexibility and empowerment often improves morale.

Potential Concerns with Using a PTO Bank

While there are many benefits to implementing a PTO system, there are some drawbacks to consider as well.

  • Employees may feel slighted when transitioning to a PTO system as the combined number of PTO days may be fewer than the time they were previously allotted under the separate vacation/sick/personal policies.
  • Some employees view PTO as vacation leave even though these days are meant to cover all time off situations.
  • Employees may be reluctant to take PTO when they are sick so they can save their PTO for vacation leave. This means that despite having PTO at their disposal, employees may be more likely to come to work when they are sick than they would with a separate sick day policy.
  • Employees may not consider maintaining PTO leave to cover sick time and immediately use all of their PTO as vacation time instead, relying on requests for unpaid leave to cover unexpected illness.

What to Consider when Transitioning to PTO

  • Scope – How much PTO should be allotted annually and what are the time increments in can be used (time increments as small as 30 minutes, 1 hour, 2 hours, ½ day)? Are you going to convert all of the current vacation, sick and personal days into PTO?
  • Eligibility – This can vary based on employment classification, years of service and hours worked per work week.
  • Carry Over – Will a pre-determined amount of time be carried over from year to year or will it be “use it or lose it?”
  • Employee Responsibilities – Employees should be encouraged to plan ahead as much as possible and there should be written policies and procedures for requesting time off.  Nonetheless, there will be times when employees will call in the day of an absence and procedures should be developed for these situations as well.
  • Administration – Managers/supervisors should still be involved from an approval perspective and should be provided with training and information to ensure consistency in managing the policy. Having buy-in and full understanding by your leadership is key to your plan’s success.
  • State and Local Sick Leave Regulations – Are you in a city or state that mandates paid sick leave?  This is a trend that has been sweeping the nation. See here for an overview of sick leave laws in the U.S.

 Communication is Key

Whatever features you choose to include in your PTO policy, it is important to communicate all of the plan details to your employees. One important way to accomplish this is to have a clear policy in your employee handbook. Addressing any questions or concerns your employees have during a benefits meeting will ensure that everyone understands the process and their responsibilities when managing their own PTO.

More Information

Keep in mind that federal, state, or local employment laws may affect the type of policy you offer. It is important to understand these requirements when creating a time-off program.

For inquiries on transitioning to a PTO plan, Helpline clients may contact the HR Works Virtual HR Helpline at 585-381-8340 or by email at: helpline@hrworks-inc.com.

HR Works is not engaged in rendering legal services. If legal advice is required, the services of a competent labor attorney should be sought.

HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.