Benefits & Perks

What is PTO and How Does it Benefit Employees?

A comprehensive PTO policy has many benefits for both employees and employers. Learn how to create a paid time off policy for employees of your small business.

Blog Author - Justworks
Aug 17, 20235 minutes
Blog Author - Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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Paid Time Off (PTO) is an important employee benefit that makes it possible for employees to take time off from work (while still getting paid). But did you know it also helps small businesses and startups compete with larger organizations to attract and retain top talent? The upsides of PTO don’t stop there — it benefits employers and employees in a number of ways. Read on to find out more.

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Types of PTO

Paid time off is considered an employee benefit, but it doesn’t always look the same from company to company. Some companies choose to provide a set amount of PTO (or even unlimited PTO) that employees can use for any personal reason, be it a family vacation, recovering from an illness, or celebrating holidays. Other companies provide separate pools of sick time and vacation or personal time.

Regardless of how companies choose to structure their paid time off benefit, some common types of PTO options include:

  • General PTO: Paid time off to be used for any personal reason

  • Vacation time: Paid time off for leisure or personal reasons other than illness

  • Sick leave: Paid time off for employees to take time off due to illness or to care for someone who is ill

  • Holiday pay: Paid time off for specific days designated as company holidays

Aside from these common types, there are actually a ton of other voluntary leave programs, like paid volunteerism or small necessities leave. These sorts of leave programs exist so employees don’t have to use other types of PTO for personal reasons that might require just a few hours away from work. Some employers even choose to give employees a paid day off on their birthday.

Benefits of PTO for Employees

In addition to the obvious benefit of being able to take time off work without losing pay, paid time off is beneficial to employees in many ways. It can boost their overall mental health and wellbeing, and it can help them perform better on the job when they’re back at work.

Increased Productivity

It’s true — PTO can help increase productivity in the workplace. While it may seem counterintuitive, people don’t perform at their best if they don’t take breaks. If people can’t step away to recharge, they’ll be more likely to experience burnout (which can lead to lower morale and productivity).

When employees are able to take time off, they’re likely to come back to work feeling energized, focused, and ready to tackle their to-do lists. This can improve overall performance, reduce the amount of time needed to complete tasks, and lead to the development of new ideas.

Reduced Stress

Having access to PTO can also help employees manage stress effectively, as they’re able to take time off when they need it. Being able to take a break from work without taking a financial hit can lead to a healthier work-life balance for team members. This will not only help them relieve stress, but it can also contribute positively to mental health.

Increased Motivation

Having access to PTO also means that employees are more likely to be motivated and engaged in their work. That’s why paid time off is seen as a benefit that drives employee happiness. And happy employees tend to be highly motivated (and highly productive, too). When employees know they can take time off work when they need to, that can motivate them to do their best when they return.

Benefits of PTO for Employers

The benefits of PTO don’t end with employees — paid time off is a worthwhile investment for employers as well. How does paid time off benefit employers, exactly? Here are just a few  ways:

  • Given many employees view paid leave as an important part of their overall compensation package, PTO can help a business attract and retain the talent they need.

  • PTO can also help reduce employee turnover by promoting a healthy work-life balance and improving employee satisfaction.

  • Because employees are less likely to call in sick at the last minute if they have a bank of time off to use when they need it, PTO can help to reduce unplanned absenteeism.

  • PTO can help prevent workplace injuries by enabling employees to take time off work when they’re too exhausted or burned out to work safely.

Can a Small Business Implement a PTO Policy?

No matter how small your company is, implementing a PTO policy can be a good idea. There’s not a minimum number of employees you need in order to offer paid time off, either. Conversely, if your company chooses not to offer PTO, you might find it difficult to hire or retain the employees you need to build your business.

Depending on where your business is located, or where you might have remote employees, there’s a chance you’ll be required to offer at least some type of paid leave. For example, many states and some counties and municipalities require most employers to provide paid sick leave.  Other states require certain employers to provide paid leave employees can use for any reason.  

You’ll need to comply with any laws or regulations that apply to your business (if there are any), but that’s just a minimum standard. On the bright side, there aren’t any regulatory requirements that prevent a small business from offering more generous paid time off as an employee benefit. 

How Do You Create a PTO Policy?

Once you’ve decided to incorporate paid time off into your employee benefit offering, you’ll need to create a PTO policy that works for your company. We’ve laid out a few steps to help you get started:

  1. Review applicable state, county or municipal laws: As mentioned above, there are a lot of laws related to paid leave that may outline things like how much to provide, how it accrues, whether it must be paid out upon employee termination, and more. Determine what laws apply to your business and make sure you comply with them throughout every step listed below. 

  2. Select a PTO program type: Determine if you’ll designate sick or otherwise mandated leave separate from vacation time, or if you’ll provide general PTO that employees can use for any purpose.

  3. Decide on the PTO allocation: Determine how much paid time off employees will receive. This can be based on factors like employee tenure, job level, or company policy.

  4. Define the accrual method: Choose whether employees will accrue PTO hours over time, or if they’ll receive a lump sum at the start of each year.

  5. Set guidelines for PTO usage and unused PTO: Establish rules for how employees can use their PTO, like whether it can be taken in increments or as full days only. Also determine if employees will be able to roll over unused PTO to the next year, or if your program will include a use-it-or-lose-it provision.

  6. Identify how to handle PTO at termination: Determine whether or under what conditions unused, accrued PTO will be paid upon separation of employment.

  7. Create a written PTO policy: Put your company’s PTO policy in writing and distribute it as an addendum to the current employee handbook.  

  8. Communicate the policy: Make sure to clearly communicate the PTO policy to employees, including how they can request time off and any blackout periods or restrictions that may apply.

  9. Track and manage PTO: Implement a system for tracking and managing PTO requests and balances. This can be done manually, or through software like Justworks.

  10. Monitor and update the policy: Regularly review and update the PTO policy to ensure it remains fair and effective. It’s also a good idea to solicit feedback from employees to identify opportunities to improve the policy.

As you can probably see, a lot of decisions have to be made when you implement a PTO policy. It’s important to consult with legal professionals or HR experts to ensure compliance with any leave-related regulations that apply to your company. They can also help you tailor your policy to your organization's unique needs.

Justworks Can Help

Don’t let the work involved in setting up your small business PTO policy stop you from offering this important and highly desired benefit to your employees. The upsides of providing PTO as an employee benefit far outweigh the work it takes to create and implement a program that works for your company. And you don’t have to do it alone — Justworks is here to help. 

Justworks Payroll, our streamlined payroll offering, allows employers to easily set up a PTO policy in the platform and track and manage employee PTO. Or, explore the HR features available within Justworks PEO. The PEO also gives employers access to Certified HR Consultants and 24/7 customer support — great for small businesses looking for a more robust HR solution. Contact us today to find out how to get started.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Justworks
Aug 17, 20235 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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