What You Need to Know About Employee Time Off

Everyone needs time off from work once in a while to take care of personal matters, relax or recover from illness. Offering paid time off to employees provides a desirable benefit that can help you attract and retain good people. But what is the best way to track and manage your employee time off policy?

In the past, employers often separated vacation time or personal days from sick leave. But the trend today for many companies is to combine different types of absences into a single Paid Time Off (PTO) policy, which allows a specific number of days that employees can use as they see fit.

The potential benefits of offering a streamlined PTO policy are:

• Giving employees more control over their work-life balance
• Allowing employees who don’t use up sick days to enjoy more vacation time
• Gaining a recruitment advantage for attracting and keeping top talent
• Reducing the number of unscheduled employee absences
• Making tracking and recording of employee time off easier

Did You Know?
You’re not required under Federal law to pay employees for time off from work for vacations, illness or holidays. But 11 states as well as Washington D.C. have requirements for paid sick leave, and the majority of companies do offer some amount of paid time off to their employees so not offering it would put you at a hiring disadvantage. 

Surprising Facts About Employee Time Off

• 91% of full-time workers in the private sector receive paid vacation time, and 90% have access to paid holidays.
• Workers today take fewer vacation days than they did 16 years ago. In fact, more than half of workers in the U.S. leave vacation days unused each year.
• About 25% of companies have a “use it or lose it” policy for unused vacation days, whereas 68% have a rollover or pay-out policy.
• Instead of separate sick and vacation banks, more than 40% of companies offer a general PTO bank.
• Some states require unused vacation or PTO days to be paid out to employees when they leave the company (this doesn't apply to sick leave).

Defining Your Employee Time Off Policy

Whether you track sick days, personal days and vacation days separately, or combine them into a single PTO bank, be sure to spell out the ground rules upfront. For example, define how far in advance vacation or time off must be requested, whether you have certain black-out periods (such as busy times of the year), and what happens if two employees request the same days off. You might approach this on a first-come, first-served basis, or base it on seniority.

Also be sure to define any additional requirements for requesting time off (such as obtaining coverage for a shift or completing a specific project first), and make sure your rules are applied consistently to everyone.

How Much Paid Time Off Should You Offer?

Like many companies, you might offer various amounts of paid time off or vacation days to employees based on how long they have worked for your company. According to the Bureau of Labor Statistics, the average paid vacation time allotments across the country vary from 10 days after one year to 20 days after 20 years. PTO allotments may be higher, when vacation and sick pay are rolled together.

Typically, new employees are allowed to take time off after a probationary period of 30, 60 or 90 days. Some companies allow employees to earn a certain number of days as the year progresses, while others allocate PTO for an upcoming year at an employee’s anniversary or specific date.

Tracking Employee Time Off

For many small businesses, keeping track of employee time off requests can be a major pain point. According a survey by the Society for Human Resources Management (SHRM), about three-fifths of companies have employees submit time off requests in writing, but only about one-third used an automated tracking software.

You can significantly improve your management of employee time off using a web-based time-off tracking solution for your business. A mobile or desktop solution provides your employees self-service access to submit time-off requests electronically. You’ll receive a notification when a request is submitted, at which point you can approve or deny the request, and it helps you keep track of time off.

Unpaid Time Off

If an employee exceeds his or her allotted paid time off, and requests additional time away from work, you might consider providing the option of unpaid time off. When granting unpaid leave, it’s important to be consistent in how you apply it. Be careful to avoid circumstances that appear to show favoritism or encourage requests that are not based on a valid reason. In addition, make sure you understand the laws regarding exempt (i.e. “salaried”) and non-exempt (i.e. “hourly) employees. For example, you can’t dock partial-day pay from exempt employees. It must be in full-day increments.

As you plan your employee time off policy, remember that while the cost of offering time off may seem high, it’s low compared to the cost of having to rehire and onboard new employees.