The concept of paid time off is something that started in the 1970s. However, it is only in recent years that it has caught on as a serious trend across the world. Employers are increasingly reaping the benefits of providing their employees with the dual benefit of assured pay and leaves. From enhancing productivity to ensuring employee wellness, a PTO policy can bring several benefits to your organization.
If you are an employer who wants to make the most of a millennial workforce, having a paid time off policy is indispensable.
That said, there is no legal obligation to give paid time off to your employees. At least there are federal rules in the United States. However, on a global level, employers have already started to recognize the need for providing PTO to employees. In fact, there are employers who are even offering unlimited PTO to their employees.
Whether unlimited or limited paid time off, you need to have a solid paid time off policy that your HR personnel as well as employees can refer to. Before getting on creating a policy, there are certain factors that you ought to know.
Some of the several factors that go into creating a paid time off policy include:
● Types of PTO
● Method of allotting paid time off
● Treatment of unused PTO
● Process of availing PTO
● Tracking paid time off used
● Paid time off policy for specific employees
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Types of leaves under PTO
PTO is basically clubbing of all allowed leaves to an employee under a common umbrella term. The term PTO makes it easy for the employer to track the leaves taken by the employee. It also spares the employee from having to disclose the reason behind each and every rule. When you are creating a paid time off policy, keep in mind to integrate the following leaves into it:
● Vacation
● Personal time
● Sick time
● Short-term or long-term disability
● Floating holidays
● Bereavement
● Comp off
● Maternity leave
● Paternity leave
● Emergency childcare leave
● Higher Studies/Sabbatical
Of course, this is by no means a complete list. There are several other types of PTO that you can include in your PTO policy.
Method of allotting paid time off
You can allow paid time off to your employees using two methods. These are the popular methods that most employers use.
● Accrual method
The paid time off gets accrued to the employee in proportion to the time served by them to the organization. For instance, one day of PTO earned for every two weeks earned. This is by no means a hard and fast rule. Depending on your organization’s scale and pace of operations, you can tweak the paid time off policy. The only catch though is that it is necessary to track the PTO accruals on a regular basis and update them in the HRMS tool. It helps employees stay in the loop about their leave accruals.
● Flat rate
Every employee is given a fixed number of PTO for the year. For employees who join during the year, the PTO is calculated on a pro-rata basis. This makes PTO calculation easier and transparent for employees and HR personnel.
Treatment of unused PTO
Apart from deciding on the method of paid time off calculation, you must also decide on the treatment of PTO. The PTO policy must be laid down whether employees get to carry forward their unused PTO or lose them all at the end of the year.
● Carry forward
Employees get to carry forward their unused PTO to the following year subject to a fixed ceiling limit.
● Lose it all
All unused PTO at the end of the period is expired. Employees may or may not be allowed to encash them as remuneration.
Managing PTO
If your businesses use an HRMS tool, all leaves can be clubbed under PTO. Employees can raise leave requests which can be seen and approved by their reporting managers.
All details like paid off time applied for, availed, cancelled, available balance, etc. should be made visible in the same tool.
Paid time off policy for specific employees
The paid off time policy does not work the same way for all employees. Depending on the service and date of joining it is calculated differently.
For new joiners
Depending on the month or part of the year during which they join, a pro-rata calculation has to be made to allot paid time off. You may also decide not to allot PTO until the employee attains a permanent status.
For departing employees
Departing employees have all the rights to use their PTO before leaving. However, you can include a clause to ensure that all knowledge transfer or handover process is completed before the employee’s departure is finalized.
For long-serving employees
Additional PTO considering the long service provided may be provided. Specific rules will have to draw mentioning how many numbers of days can be allotted as PTO for long-serving employees. Also, what constitutes as long service must also be defined to avoid ambiguity.
Drawing a paid off time policy is not an easy task. It involves considering several facts, cross-checking legal restrictions and ensuring consistency before it is finalized. The above pointers will help you create a near-perfect paid off time policy for your employees.
