10 Things to Consider When Creating a PTO Policy

Whether you are a small business expanding or a medium-sized business on the way to becoming an enterprise, your employees are your backbone. Paid time off gives them the rest they need to recover, the freedom to address their personal needs, and most importantly, a sense of ownership and self-discipline regarding their work-life balance. With paid time off, you show trust in your employees by treating them as responsible adults who can make their own decisions about taking time off from work without their work performance suffering. You no longer have to explain (or lie to them!) to your bosses why you need time off. To make the most of PTOs, a PTO policy becomes the guide that informs your employees about the number of allotted days off, the process for scheduling scheduled days off, accumulation of days off, special days off such as bereavement leave, etc.

And that's not all.

A PTO policy also offers numerous benefits to managers. For business owners and managers, introducing paid time off into their company without a corresponding PTO policy is like driving your car without knowing the direction or destination. You're bound to get lost. A PTO policy helps you enforce what you want to achieve with paid time off: reducing absenteeism, increasing productivity, attracting talent, etc. It helps you plan your goals based on employee availability as they Know in advance when an employee has scheduled time off. Plus, you don't have to give permissions or ask for explanations as your employees take their allotted time off. Companies like Netflix have recognized the benefits of a clear leave policy that helps their employees achieve a good work-life balance and thus achieve excellent performance. Given the countless benefits of paid time off and its effective implementation, a clear PTO policy is the best path for your company.
Wondering how to get started with your PTO policy? We have everything for you.

Here are 10 things to consider when creating a PTO policy

There is no blanket PTO policy. It depends on the size of the company, the corporate culture and the length of service of the employees. To get started, keep the following points in mind:

1.Assigned PTO days

According to a 2016 SHRM survey, the average length of PTO and vacation time depends on the employee's length of service. A survey conducted by WorldatWork also found an average range of 16 to 28 days of annual leave, largely dependent on length of service. The U.S. Bureau of Labor Statistics reports that companies provide an average of 10 days of paid vacation for a year of service. This is usually seen as a sign of appreciation for existing employees and can help retain them and reduce turnover rates. Determine whether you want to offer PTO and vacation days based on length of service and designation, or whether you prefer to provide all of your employees the same amount of PTO from their first day of work.

2.Verification of legal obligations and compliance with regulations

Paid leave is not required in the United States, but companies must provide paid leave to protect job security under certain conditions outlined in the FMLA. Check whether the company has similar paid time off and vacation days policies.

3.PTO eligibility

Is PTO available to part-time and contract employees, or is it limited to full-time employees of the company?

4.Are PTOs accumulated or offered in lump sums?

Would you offer the allocated PTO once per year, or would it accrue at regular intervals over a year?

5.Does the balance of the PTO roll over or is it use it or lose it?

Some companies prefer to start each year with a new set of PTO for the year. This can force employees to use all of their PTO toward the end of the year, resulting in a flood of PTO requests. To find a middle ground, some companies offer the option of converting PTO into benefits to help employees with their financial needs. Or you can set a cap on the number of PTOs that can be rolled over to the next year. Analyze what may work best for you.

6.Should PTO be mandatory?

Sometimes employees don't feel comfortable taking time off because they're worried they'll miss out on work or because they're worried it might negatively impact their performance. One in five U.S. workers feel guilty about taking time off because they worry it will make them appear less committed. In such cases, companies should require their employees to take time off so that they can take a break and return to work refreshed. This also prevents employees from hoarding their free time and helps them take breaks at the right time.

7.Talk to your managers and train them

Speak to the managers responsible for approving time off requests and understand the real situation. As you develop the system, teach them how to handle requests for compensatory time off and how to plan for employees' planned time off. If you use leisure management software, show them how to use it.

8.Determine the needs of your employees

Conduct a survey to understand the pulse of your employees - what do they want, what do they think of time off, and how would they like it. It's not possible to address every employee's needs, but make sure you let them know why you implemented your plan.

9.Make sure the policy is clear, concise, and consistent with your company culture.

Your PTO policy is not a set of rules for your employees. It is a handbook that reflects your company's culture and values. Communicate them clearly, address any concerns employees may have, and ask them to pass them on. Use your PTO policy to engage employees and share how your employees used their vacation (with their permission, of course) and how it helped them come back refreshed.

10.How to measure the effectiveness of your PTO policy

Be clear about the purpose of your PTO policy and why you need one. Determine the metrics that will inform you about the effectiveness of your PTO policy and have a team regularly review and optimize them.

It's important to remember that there is no such thing as a perfect PTO policy. It's about creating an arrangement that works well for your company and its employees. It is not something that can be done in a day, but rather a continuous, optimizable process. The impact can be seen in your employee performance, turnover rate, employee NPS, and your recruiting efforts. Most importantly, a good PTO policy ensures happy, productive employees. How has your PTO policy performed in your company and how have you measured its effectiveness? Let us know in the comments below.

In conclusion, a well-structured PTO policy is a compass for businesses navigating workforce management. IceHrm offers comprehensive tools to streamline PTO implementation, ensuring a harmonious blend of employee well-being and organizational goals.