One of the best ways to maintain a high level of employee engagement and retainment is by offering a competitive benefits package. Furthermore, having a strong company paid time off policy is key to ensure that your company remains highly regarded in the eyes of current employees and potential applicants. There are many things to consider when planning for and managing paid time off benefits for your employees. Let’s take a look at some best practices for PTO benefits.
Best Practices for PTO Benefits
Here are areas to focus on for your company’s paid time off policies.
- Choose how much and what kinds of PTO you would like to offer to your employees
- Decide on how and when your PTO will be distributed to your employees
- Think about how you will allow your employees to request and use their PTO
- Plan on how you will keep track of your employees PTO balances
- Create policies on PTO rollovers, pay outs, and more
Choose which types and how much PTO you would like to offer
The first step to offering a great paid time off policy for your company is to do research. Researching industry standards for the categories and amount of paid time off that competitors offer gives you an idea of how your PTO policy should look. Being competitive on this benefit will make your company attractive to potential applicants. Once you have an idea of industry standards, think about the which of your employees will be eligible for PTO benefits and how much time off you are going to offer. Types of paid time off to consider include:
- Sick time
- Vacation time
- Personal days
- Paid leave
Each business has different needs so offering all of the above types of time off may not be the best for your business. Think about each type of time off and if it works in your business. Once you have decided on the types your company will provide its’ employees, decide how many hours/days of each type you will offer. For example, maybe your business will offer 3 sick days, 10 days of vacation time, and 2 personal days for grand total of 15 days (3 weeks) paid time off for your employees.
Decide on how and when you will distribute PTO
Once you know the categories and amount of time you will offer your employees, you will want to make sure you decide on how and when to offer this PTO. Again, it is important to do your research to learn what is standard in your industry. Make a selection on how your employees will gain their paid time off that works best for your business. Some ways to consider include:
- Lump Sum PTO: providing the full allotment of time off to your employees at one time. This could be on their hire date, at the beginning of the calendar year, or on their anniversary date.
- Accrued PTO: allowing your employees to earn their time off over the course of the year. For example, your employees earn 1 hour of time off for every 20 hours of work. This allows employees to compile as much time as they would like before using it. Some businesses allow their employees to take time off even if they have not banked enough of it, which results in a negative PTO balance. Other businesses only allow employees to take paid time once they have enough time to take.
- Unlimited PTO: giving an unlimited amount of time off to your employees. This is a great benefit to offer your employees but needs to be monitored closely. Managers need to stay on top of this to make sure that employees are still satisfying the needs of the business and not taking advantage of their unlimited PTO balance.
You will have to answer other questions such as:
- Will you be be offering this paid time off to all employees, or only full time employees?
- Will employees receive this time as soon as they are hired, or will they have to work for the company for a certain amount of time before receiving time off?
Think about how you will allow your employees to request and use their PTO
An important step to running a successful PTO plan for your business is to have the proper steps in place for your employees to use their time off. Think about your business’ needs and create policies beforehand and be consistent in applying these policies. Maybe you own a restaurant and there are days of the week or times of the year when your employees will not be able to take paid time because of business demands. As a construction company, maybe you do not want your employees requesting time off during a certain project. Planning ahead and communicating your policies clearly will be both beneficial to your business and your employees.
Another key area is having a system in place on how your employees will request their time off. Should your employees have to request time off well beforehand? Who do they request their time off with? Who is responsible for approving or denying these time off requests? How is scheduling coverage handled? Before putting this time off benefit in place, it is best to have all of these questions answered so your employees will know when and how to use their PTO.
Plan on how you will keep track of PTO balances
Now that you know who will receive time off benefits and how much you will offer, you need to be able to keep track of your employees’ PTO requests and balances. This is a crucial step to successfully managing a PTO program for your business. The best way to do this is by using a time and attendance software that allows you to easily manage and track time and time off. A fully integrated solution allows you to:
- Add personalized rules for your business’ policies so only those eligible employees can access time off benefits
- Build customized restrictions around when your employees can request time off
- Allow eligible employees to see their PTO balance and easily submit time off requests
- Allow managers to approve time off requests quickly from any location, automatically adjusting balances when necessary
- Provide insights to managers that allows them see time off requests when scheduling
- View customized reports to track PTO balances
- Renew time off balances at the beginning of the calendar year, on employee anniversary dates, or other designated times
Trying to keep track off your employee PTO balances on paper or even a spreadsheet can result in incorrect balances and potential payroll errors. Over time, it will be difficult to maintain compliance and these errors will result in lost money for the business and dissatisfied employees.
Create policies on PTO rollovers, pay outs, and more
Creating policies that work for your business and sticking to these policies is key to running a smooth PTO program. You need to have steps in place ahead of time for when your employees ask you questions. Know if you are going to allow your employees to rollover any paid time off into the new year. Will employees be eligible to receive payouts for any time off balances when they leave the company or will you request them to payback any negative PTO balances? Working with a HR professional to help create standard policies can be beneficial to your company.
**Update** As of April 7th, 2022, Maine has amended previous law to require the payout of any unused, accrued vacation time upon cessation of employment for private businesses with more than 10 employees. Read more here.**
PTO is a critical part of a business’ time and labor management practices. We would be happy to assist you in creating a customized PTO plan for your business or help you manage and track your current benefits! Please contact us for additional help!