PTO stands for “personal time off” or “paid time off.” Different companies may prefer one term over the other as the full form of PTO, but both phrases refer to the time an employee takes off from work and still gets paid. In this post, we’re going to refer to PTO as “paid time off,” as that is the more common way this acronym is interpreted.
Many businesses offer PTO for multiple reasons, including when an employee is sick, needs a personal day or two, or takes a vacation. These are technically separate types of leave, but they can all fall under the umbrella of PTO.
What does PTO mean for an employee? An employee can use paid time off for reasons outlined in their company’s policy. When an employee decides to use PTO, they typically must put in a request with their employer. Then, the employer pays the employee their hourly wage during the time off, or a wage based on their salary according to the number of hours of paid leave they take.
Usually, hours accrue throughout the year based on the amount of time an employee works. Alternatively, some companies offer a specific number of PTO hours to each employee at the beginning of a benefit year.
How PTO Works with Other Types of Leave
Many companies craft their own PTO policies that detail what is included in the company’s paid time off. However, state law always takes precedence over a company’s PTO policy.
Some states have laws regarding PTO that specify how an employer must allow employees to use their time off. In a few states, employees do not need to give their employer a reason for using PTO. Therefore, in those states, companies can’t dictate whether an employee can or cannot use PTO based on their reasons for wanting a period of leave.
However, many states have no paid time off laws, allowing employers to navigate these benefits a bit more freely. In these cases, employers may choose to keep every type of leave separate. Other companies might bundle PTO with sick leave and vacation time to simplify their policies and processes, which is the preferred method for Stone Press.
In other words, PTO tends to flow together with other types of leave and, in some companies, may even be indistinguishable from vacation pay and sick leave.
The following are other types of leave companies offering PTO might provide employees:
- Sick Leave: Sick leave is governed by each state. Some companies include sick leave under their general PTO policies, while others separate the two into different policies.
- Vacation: Vacation time is often bundled with paid time off, allowing employees to use their accrued PTO hours to take a break from work. Other employers have separate policies that provide more distinction between vacation and PTO. However, some states with PTO laws do not allow companies to require a reason from an employee for using their accrued PTO.
- Bereavement Leave: Bereavement leave gives employees time off to grieve the loss of a loved one and attend a funeral and related services. Employers often separate a bereavement policy from paid time off to give their employees time that doesn’t count against their accrued PTO hours.
- Jury Duty: Most states do not mandate that employers pay employees for time off relating to jury duty. However, a few states, like Colorado and Louisiana, do. Additionally, some states have laws requiring employers not to count jury duty service as PTO for an employee.
- Leave of Absence: Leave of absence policies outline a company’s rules surrounding extended time off. This can envelop several types of leave, like vacations, bereavement, or medical leave. Many companies with leave of absence policies pay for time off up to a specific amount of time, allowing additional time unpaid.
- Family Leave: The Family and Medical Leave Act (FMLA) is a federal regulation requiring most employers to provide up to 12 weeks of leave for a newborn’s birth and care, to care for a sick family member, or to take a medical leave of absence. The law does not require employers to make this paid leave, but some companies do pay their employees for all or some of the 12 weeks they’re allowed.
- Holidays: Some companies pay employees to take time off during specific holidays, like Christmas, Thanksgiving, and Memorial Day. Holiday pay is not required to be paid under federal standards, but companies can outline their own policies for holiday pay.
- Unpaid Leave: Unpaid leave refers to any form of leave an employee takes that a company does not reimburse. In states where paid sick time isn’t law, for example, a company may allow sick time to accrue for each employee but not pay that employee for the sick time they use. This qualifies as unpaid leave.
PTO for Hourly vs. Salary Jobs
Hourly and salaried workers have equal rights to paid time off. However, the way in which PTO is calculated for hourly and salary jobs might vary, depending on state law and company policy. Because calculations can differ between hourly and salary employees, some companies opt to have separate PTO policies for the two groups, each outlining the specific processes for calculating PTO rates.
Calculating PTO benefits for salaried employees versus hourly employees can vary in complexity, depending on the employer’s state. For instance, Nevada’s paid leave law requires employers to pay salaried employees based on what they’ve earned and the number of hours worked for the previous 90 days before taking paid leave. Meanwhile, employers can pay hourly employees the same amount as they usually make per hour for the number of hours of PTO they use.
In states without specific PTO laws, employers can create their own rules surrounding PTO pay for hourly and salaried employees.
Common PTO Policy Structures
Employers may use different types of PTO structures when creating a PTO policy. The following are four of the most common PTO policy structures.
Accrued PTO
Perhaps the most common paid time off structure is accrued PTO. This type of policy allows a certain number of PTO hours to accrue over time as the employee works for the organization.
For instance, a company might give an employee one PTO hour for every 40 hours worked. After working for three 40-hour periods, that employee will have accrued three hours of PTO. Then, after accruing 24 hours of PTO, the employee might put in a request for three days off using their earned hours.
Accrued PTO is common in states that dictate how much paid time off an employee must earn for a specific number of hours worked.
Lump Sum PTO
Lump sum PTO is a simple way to give employees the full amount of paid time off the company allows at one time, permitting those employees to use it when they want without waiting for it to accrue. With this method, employers give employees a set number of PTO days per year, all of which are allotted at the same time, usually at the beginning of the year.
As an example, say an employer provides four weeks or 20 days of PTO annually. That employer gives each employee 20 days of PTO at the beginning of the year. All eligible employees can then use that PTO off at any time before it either expires at the end of the year or rolls over to the following year if allowed by the company.
Because lump sum policies are generally more straightforward than accrual policies, they can cut down on administration time and costs.
Unlimited PTO
According to data from the Bureau of Labor Statistics, the average private-sector employee only has 15 days of vacation after five years with the same employer. However, several companies have pushed for more breaks for employees by enacting unlimited PTO policies.
Unlimited PTO gives employees room to take vacations, personal days, or sick time and still get paid for it. The employer doesn’t dictate how much time off the employee takes, per se, but employees still must get approval for the time off.
Netflix’s unlimited PTO policy is one of the most well-known, swapping stringent PTO policies for a more malleable policy that employees can use in whatever ways work best for them.
Flexible PTO
Flexible time off, sometimes referred to as FTO, is similar to unlimited PTO in that it doesn’t have the typical constraints that the average PTO policy does. This type of policy can vary significantly between companies, but it generally lets employees use their time when and how they need it, sometimes even skipping the requirement of requesting PTO in advance.
Buffer’s PTO policy can be thought of as flexible time off. Rather than setting maximum limits, the company provides minimum requirements for the amount of time employees should take off. Still, there are some rules surrounding bereavement leave, sabbaticals, voting, volunteerism, and other forms of time off, although the entire policy is gracious and transparent.
Every Company Has a Unique PTO System
Paid time off requirements and norms vary from company to company. Every employer can detail rules regarding PTO as long as those rules fall within their state’s regulations for paid time off. Some of the differences you might find from company to company include, but are not limited to:
- Carrying unused PTO over from one year to the next
- Paying for unused PTO after leaving the company
- How PTO accrues and when it’s given
- PTO hourly or weekly caps
- How PTO gets reimbursed
- The types of paid leave offered
The best way to learn about your company’s precise PTO policy is to read through the company’s benefits literature. The policy should be clear and transparent for all employees to understand their rights and responsibilities regarding paid leave.
