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Deciphering PTO: Understanding Paid Time Off

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What goes into an effective PTO policy? Paid time off, also known as PTO, is a key part of the employee experience. It allows employees to recover, take breaks and improve their work.

However, the associated processes are often complex, unclear or simply not user-friendly. In this article we will give you an overview of PTO entitlements in the UK and how you can formulate a policy for your business.

What is PTO?

Paid Time Off (PTO) is a period of time, e.g. in the form of days or weeks to which an employee is legally entitled and for which he is paid by his employer. It is also known as statutory leave or annual leave.

When does PTO start?

An employee's PTO entitlement begins as soon as he or she works for a company that has implemented a PTO policy. The employer typically has the final say on when the employee can use their PTO, and the employee receives their normal wage or salary when the PTO is used.

What are the benefits of PTO?

Today's workers are burned out. More specifically, 76% of them are burned out at least some of the time. Whether it's due to workload, work environment, or personal circumstances, if your employees aren't motivated, they simply won't be productive - and most likely won't be happy either.

Offering PTO is just one way to improve your employees' work-life balance, and it's also one of the most desired. For 30% of workers, an increase in annual leave is an incentive to change jobs.

However, providing employees with paid leave requires a clear, well-thought-out policy that includes guidelines based on the employee's specific role (and protects the company).

How much is the PTO entitlement in the UK?

In the UK, most employees who work a five-day week are legally entitled to 28 days of paid holiday per year, or 5.6 weeks.

Part-time employees and employees who have irregular working hours, such as: Employees, such as shift workers or semester workers, are also entitled to PTO for every hour they work.

What types of PTO are there in the UK?

In the UK, a company's PTO policy will typically cover the many different types of paid leave and their respective policies. These include, among others:

1.Maternity leave

Maternity leave includes time off work before and after the birth of a child. In the UK, maternity leave has a maximum duration of 52 weeks unless the employer specifies otherwise.

“Normal maternity leave” extends to the first 26 weeks, “additional maternity leave” to the second 26 weeks. Maternity leave can be taken no earlier than 11 weeks before the week of the due date, unless the child is born prematurely.

Workers who have given birth must take two weeks' leave after the birth, or four weeks if they are factory workers.

For the first six weeks of their maternity leave, eligible employees typically receive 90% of their average weekly earnings (before taxes). For the remaining 33 weeks they will receive 90% of their average weekly earnings or £151.20 (whichever is lower).

This can vary depending on the type of employment (part-time, full-time, etc.) as not every employee is entitled to statutory maternity pay.

2.Paternity leave

Paternity leave is usually available to those whose partner has given birth to a child or if they and their partner have adopted a child. In the UK, eligible partners are entitled to two weeks of statutory paternity leave.

These two weeks can be taken consecutively or separately, but must not begin before the day of the child's birth and must be completed within 56 days of the child's birth.

Those who take paternity leave will typically receive statutory paternity pay of £148.68 per week or 90% of their average weekly earnings, whichever is lower.

3.Paid sick leave

Sick pay, also known as statutory pay (read more: our guide to statutory pay in the UK), applies to employees who are sick for at least four consecutive days, including days off.

The employer pays statutory sick pay from the fourth day until the employee returns to work. Employees on paid sick leave can receive £94.25 for up to 28 weeks, paid to them on their regular payday, with tax and national insurance deducted as usual.

4.Pity vacation

When a relative or family member of an employee becomes ill, employers often provide compassionate leave or bereavement leave following the death of a loved one.

There is no legal requirement for employers to provide paid or unpaid medical or bereavement leave, but employers who want to support their employees when they need it most should definitely do so.

However, UK workers are entitled to unpaid leave due to:

  • Illness, injury or attack
  • Interruption of care arrangements
  • Your child is involved in an incident at school

5.Paid annual leave

As mentioned above, UK employees are entitled to paid annual leave in the form of 28 days or 5.6 weeks of holiday. Depending on the employer, public holidays can be included in statutory vacation.

Should your policy provide for fixed or unlimited vacation days?

Unlimited paid vacation is common for companies looking to attract top talent. This is a growing trend in the UK, where the number of places offering unlimited PTO increased by 20% between 2017 and 2018.

However, offering unlimited paid time off can also have negative effects: Because there is no set limit, employees are more afraid to take time off and may even end up taking less vacation.

While this sounds good for productivity, it can quickly affect employee morale and motivation, which only reduces productivity in the long run.

To get around these problems, some companies implement a mandatory minimum number of vacation days that employees must take as well as an unlimited amount of PTO. This gives employees the policies they need and want, while still having the freedom to confidently request additional days off.

How employees and companies benefit from PTO

For employees, the main benefit of paid time off is pretty clear and obvious: they get paid for their work, even when they're not working. But in reality, it's so much more than that - and employers benefit from it too.

  • Better mental and physical health - If an employee says their job is killing them, they may not be completely overreacting. Long working hours can increase a worker's mortality by 20% due to mental, emotional and physical stress. Never underestimate the power of an afternoon away from your desk or a long weekend. When compared internationally, British workers have slightly worse health and well-being at work than the average worker. However, when they receive paid time off, they have more time to pursue creative hobbies, stay active, and socialize - all of which can improve their quality of life and have a positive impact on their work at the office.
  • Better Employee Retention - According to LinkedIn's 2020 Global Talent Trends Report, companies rated high in benefits and compensation experienced 56% lower turnover, and companies with flexible work arrangements experienced 137% higher headcount growth. Offering a PTO policy falls easily into both categories and is a clear long-term benefit for employees.
  • Better productivity and performance - Just one week of vacation per year can have a dramatic impact on how an employee views their work, their leadership team, and the company as a whole. A survey by O.C. Tanner found that 70% of employees who regularly take a week's vacation (or more) are highly motivated to contribute to their company's success, while only 55% of employees who don't take vacation feel the same motivation. Vacation days can be used as recognition and reward for an employee's hard work or commitment to the company. And recognition has a long way to go: Companies with integrated recognition strategies are four times more likely to have engaged employees, twice as likely to have increased revenue in the last year, and twice as likely to have their employees burnt out is 44% lower.

How do you define a PTO policy?

Now that we've explained the basics and importance of a PTO policy, let's look at how you can define your own:

A tailored approach

It's often best to customize an employee's PTO policy because you can tailor it to the type of employment (full-time, part-time, shift work, etc.) and length of service. The PTO policy for each employee should answer the following questions:

  • How much paid time off can the employee take per year?
  • How many hours of work per week does the PTO entitlement relate to?
  • How does an employee's additional hours/overtime affect their PTO?
  • What regulations apply in the company for maternity leave, paternity leave, sick leave, compassionate leave and bereavement leave?
  • Will you implement PTO rollovers or a PTO bank? If so, how is this calculated?
  • Is there a maximum limit for carrying over PTO to the next year?
  • What is the minimum PTO requirement per year (1 hour, half day, 1 day, etc.)?
  • How does the company handle emergencies and paid (or unpaid) time off?
  • Will they be compensated for their unused PTO if they are laid off or laid off?
  • How might the company's policy change in the future?

Your PTO policy should also cover the more practical aspects of how, where, and when employees can request time off:

  • How do employees submit their applications? (via email, HR software, calendar requests, etc.)
  • Do the requests need to be approved by the manager/supervisor? If so, who is responsible for this approval?
  • How far in advance do employees have to submit their applications?

Clarity about PTO

In a 2019 survey by Vitality, 28% of employees said they didn't want to take time off because they didn't think their mental health issues were a valid reason, and 22% said the same about their physical issues.

If employees don't know what counts as a "valid" reason for taking vacation, they will typically avoid it, and their problems (or even their dissatisfaction with the company) will only increase.

Formalize and disseminate your PTO policy

Once you've established your company's PTO policy, immediately include it in your employee onboarding and training materials so it becomes a seamless part of your process. (Psst: If you're still doing this by hand, we have to tell you that there's a better, easier way to manage your HR processes).

Discuss the policy with necessary team members so that all employees receive consistent information when questions arise.

If the PTO policy is new or just updated, communicate it to employees - and be open to their feedback. Your policy can change over time as the company and employee needs change, and you can add to what works and improve what doesn't.

Reporting and tracking PTO

No matter the size of your company, managing numerous time off requests can quickly become overwhelming. By digitizing your process with IceHrm's absence management software, you can:

  • Review and approve vacation requests in a snap
  • Get a comprehensive overview of each employee's vacation history
  • Automatically calculate an employee's remaining vacation time
  • Analyze your company's absence rates

Investing in a well-defined PTO policy fosters employee satisfaction and productivity. Consider IceHrm for streamlined PTO management and happier teams.

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