A solid PTO policy isn’t optional anymore... Why?
Just look up "work-life balance" and you'll find everyone talking about the importance of real downtime. It’s no longer just about offering vacation days; it’s about showing your team that you value their well-being and understand their need to recharge.
Companies that don’t prioritize this are at serious risk of losing their best employees to places that do.
The biggest challenge now isn’t whether to offer this benefit, but rather, how to offer it in the best way possible.
Questions to Ask Before Creating a PTO Policy
While it may seem that the most important part of designing a PTO plan is how many days off you will allow, there are actually a number of equally important questions that need to be considered first:
- Which employees will be eligible to earn PTO hours?
- What method will be used to determine the amount of hours they earn?
- When will this benefit begin, and what happens to unused hours?
- Then the final question: How in the world can you keep track of who is requesting time off, who needs to be notified, and if they even have enough hours available?
A Balanced Approach to PTO
Paid Time Off (PTO) is a valuable benefit that helps employees balance their work and personal lives, recharge, and maintain high morale. However, creating a PTO policy that whirks (pun intended) for your small business can be challenging due to its customizable nature.
Typically, Paid Time Off benefits are included as a perk to Full Time employment. However, with the modern PTO policy encompassing everything from vacation time to sick leave to mental health days, providing an allotment of PTO hours— even for part-time positions— can be beneficial.
At Whirks, we accommodate various methods and designs, but the simplest, most equitable, and easiest to reward longevity of employment is the “Per-Hours-Worked, Anniversary-Date-Based” plan.
Accruing PTO Based on Hours Worked
One of the easiest and fairest ways to manage PTO is by linking it to the hours your employees work. This approach automatically adjusts PTO accrual rates depending on whether someone is full-time or part-time, allowing you to be equitable across all employee types regardless of whether they work full-time or part-time.
- For Full-Time Employees: Since full-time employees work more hours, they will naturally accrue more PTO. This allows them to benefit proportionately from the time they invest in the company.
- For Part-Time Employees: Part-time employees also accrue PTO but at a reduced rate. They receive a fair amount of PTO relative to their hours worked, without the need for separate PTO plans.
This approach simplifies PTO management by eliminating the need for different plans for salaried and hourly employees, as the accrual system adapts automatically based on hours worked.
Basing PTO on Anniversary Date
Aligning PTO accrual with each employee's anniversary date rather than a calendar year offers several advantages.
- Incorporate a Probationary Period: New Hires can begin accruing PTO from day one, but you can restrict its use until they complete a probationary period. This flexibility helps ensure that new employees are committed before they start taking time off.
- Increase PTO with Tenure: Using the anniversary date as a marker allows you to offer increased PTO accrual rates as the employee's tenure with the company grows. For instance, employees who have been with the company for five years earn PTO at a higher rate than those who have been with the company for only one year.
Perhaps a less obvious benefit is that if employees receive their PTO hours at the start of their anniversary year, they won’t all rush to use their time off before losing it at the end of the year. While holiday seasons will still lead to multiple time-off requests, having PTO hours available beyond the calendar year encourages employees to make plans at different times, easing the pressure during peak periods.
Because these milestones will be reached at different times for each employee, the only way this kind of tiered benefit works equitably is if it is based on each employee’s Anniversary Date, and not the calendar year.
When Should the PTO Year Begin?
In the not-so-distant past, the idea of PTO benefits beginning on January 1st and ending on December 31st was standard. It was by far the easiest way to keep track of employees’ balances throughout the year.
However, with the introduction of more robust payroll software, the need to make everyone start fresh at the new year is no longer necessary, nor is it the best.
By structuring your PTO policy around the employee’s Hire Date (a.k.a., Anniversary Date), you open up many helpful management options, such as tiered accrual rates, probationary periods, and scattered carryover dates.
PTO Carryover Options
Which brings us to the question, what happens when employees don’t use all their PTO within a year? Allowing a carryover of unused PTO into the next year can significantly boost employee morale and prevent the rush to "use it or lose it" at year-end.
Flexible Carryover Options
Consider allowing a few days or even a full week of PTO to carry over into the new year. This gives employees flexibility in planning their time off, reducing stress, and improving their work-life balance.
Avoiding PTO Burnout
With incremental PTO accrual, carryover is crucial to avoid losing hours accrued late in the year. This ensures that employee's efforts throughout the year are fully rewarded.
Consider a Negative PTO Balance
While it may seem risky, allowing employees to request a negative PTO balance can be a powerful moral booster.
Planning Ahead
This option allows for employees to plan for future vacations, even if they haven't yet accrued enough PTO. They can book their trips knowing they will have the necessary time off by the time their vacation arrives.
Building Trust
Allowing negative balances shows trust in your employees and their commitment to the company, which can go a long way in strengthening their loyalty and job satisfaction.
The Best Way to Track PTO Time
Once you have the difficulty of deciding these details behind you, the next challenge is keeping track of it all.
Fortunately, if you've adopted an Anniversary-Date based policy—whether it uses a Per-Hours-Worked accrual or a Lump-Sum allotment—there are software solutions available that can do the heavy lifting for you.
At Whirks, we use iSolved, a platform that enables us to automate both the awarding of hours and the reduction of balances as part of our regular payroll processes. Employees benefit from this system by easily accessing their balances and requesting time off through their self-service accounts. Additionally, automated workflows notify all relevant parties via email about PTO requests, simplifying the approval process. With just a few clicks, PTO requests can be reviewed, approved, and hours added directly to payroll, regardless of how far in advance the request is submitted.
Paid Time Off benefits are increasingly becoming a vital part of compensation packages. Many states now mandate at least a Sick Leave policy, which helps prevent employees from having to choose between working while ill or receiving a paycheck.
By creating a policy that supports a healthy work-life balance, you're fostering a positive work environment and contributing to the overall well-being of your employees. Offering more time off as a reward for continued employment can also reduce the need for frequent hiring efforts.
Finding a Happy Medium
Benefits like PTO are a great way to make your workplace an attractive place to work. But it's also crucial to have employees in the office to keep the operations of the business running.
Now that you’ve got a better understanding of the importance and flexibility of PTO, the next step is to take a closer look at your current policy and consider where adjustments can be made. Your employees—and your bottom line—will thank you for it. Check out our article on "How to Create Leave Policies That are Generous and Practical" to keep refining your policy so it works well for both you, your business, and your employees.
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