What are the pros and cons of paid time off policies?

While the prospect of creating or updating your paid time off policy may seem like a simple matter of changing a line in the employee handbook, there are actually several important factors to consider. Since the federal government has no official requirements about paid time off, there are endless ways to customize your plan to your company’s needs. This fact also means there is no guideline to use to make sure you’re providing a fair policy for your staff. How you choose to offer paid leave to your employees depends on your employees and your company culture.

Unlike traditional time off policies that allot vacation days, sick days, and personal days, a paid time off (PTO) policy lumps all of these into one category. There are some benefits to this kind of policy for both employees and employers, including:

• To some employees, a PTO policy likely seems more fair; everyone gets the same number of days (or accrues them at the same pace), and can use them in whatever way makes most sense to them. If they decide to use an extra day toward vacation that one of their colleagues might use to take care of a sick kid, it all shakes out to be equal.
• For employees who are generally healthy and have generally healthy families, this can be a great benefit. Since any employee is allowed to take days off as they see fit, they can apply what would have previously been a sick day toward a vacation, or use them to handle personal tasks.
• A less structured PTO plan may be a recruiting advantage in some industries. Young employees may be willing to take slightly lower pay if their overall compensation package includes a generous PTO package that can be used for vacation and personal time.
• For employers and HR managers, this kind of time off plan may remove some tedious tasks from the workload. Instead of the administrative headache of managing different time off categories for each employee, managing a PTO plan is a simple matter of noting when an employee uses some of their banked days of PTO.
• A less rigid PTO plan is also likely to reduce the number of last-minute “sick day” call-ins from healthy employees who are out of personal and vacation days, but need to take a day off nonetheless. In a PTO plan, any employee can just tell their supervisor ahead of time that they plan to use their time off on a given day, and the remaining staff’s workload can be adjusted accordingly.

However, there are also some potential drawbacks to consider as well when you’re thinking of implementing a PTO plan:

• With a PTO plan, the burden of allotting time off for various reasons falls directly on employees. Since it can be difficult to plan for how many days you’ll be sick or how many times you’ll need to manage a personal issue, employees may find it challenging to plan and use their time off appropriately.
• Cautious employees will likely end up using fewer vacation days so they can hold onto PTO in case of an emergency. Employees with young children or a health problem that requires regular management will also likely end up using most of their PTO on sick days. These employees will be more susceptible to burnout or frustration with their jobs, since they have no officially sanctioned vacation time.
• Less cautious employees may see that they have 20 days of PTO and plan 20 days of vacation, leaving no wiggle room for unexpected circumstances like illness or personal errands that may arise.
• Generally, when establishing a PTO plan, there is some sort of buyout clause in employee contracts. If several employees with large banks of PTO days leave, there may be a significant unforeseen financial burden on the company to pay them for their unused time off.

Whether a move to a less structured time off model makes sense for your company depends entirely on your workforce and the culture you’re trying to build. If you are in a newer industry, or if your employees are primarily young professionals without families, a true PTO bank may be a great fit and a good recruiting advantage. If your staff is more diverse, or you work in a more traditional field, it may be in your best interest to maintain a traditional approach to employee time off.

The key to fair and successful implementation of any time off policy is accurate time and attendance reporting. See how Fuse's integrated HR platform can help you automatically capture time and attendance information from a variety of sources.