From face value, the process of coming up with a paid time off policy seems like a walk in the park. Unfortunately, there is a lot that goes into creating an effective paid personal time off policy. And given that the federal government doesn’t have official regulations and requirements regarding paid time off, you can get creative with the customization process to suit your company needs.

Moreover, the absence of federal guidelines also means you’ll have to do a lot of troubleshooting to provide a fair policy for all parties involved. But overall, how you structure your paid time off policy depends on the employees you have and the company culture.

In this piece, we’ll dive into how paid time off works and its pros and cons.

What is paid time off policy?

Now, unlike the traditional time-off policies which allocate sick days, personal days, and vacation days, PTO policies group these categories into one. It’s basically a pool of days that employees can use at their discretion.

So whenever an employee requires some time away from work, the PTO policy allows them to take a couple of hours off from their pool of days. They can opt to use the time to attend conferences at their kid’s school, honor a doctor’s appointment, wait for a plumber to fix the system in the house, or relax as they recover from the flu. How they use their time is no longer the employer’s business.

From the brief description, you can tell that though it’s a good arrangement, there’s a potential of exploitation by employees. Below is a list of pros and cons to help you decide if it’s a route worth taking.

Pros

• To most employees, a PTO is fair because everyone gets the same number of days to use in whatever way makes sense for them. They can opt to use them for a vacation or to recover from a sickness.
• For employees who are healthy and rarely have medical emergencies at home, they can use their days to extend their vacation or handling personal tasks.
• A flexible PTO policy is a recruiting advantage in some sectors. Young employees can accept lower compensation if the package offered comes with a generous PTO policy.
• For HR managers and employers, a PTO policy removes the tiresome task of managing employee time offs. With a PTO policy, managing their time is as simple as noting when an employee uses their banked days.

Cons

• The burden of keeping tabs on paid time off falls on the employee. Given that it’s impossible to know how long you’ll be sick, or how much time is needed to resolve a personal problem, appropriately managing paid time off can be a challenge.
• Employees who have health problems requiring regular monitoring or have young children will use the PTO on sick days. On the other hand, cautious employees will use fewer vacation days so that they have more days in their bank for emergencies.
• Some employees who throw caution to the wind might use up all their banked time on vacation and leave none for emergencies.
• Usually, employers include buyout clauses in contracts to protect them from unforeseen financial burdens in cases where employees use their banked time on vacation days.

With the above information, a move to create a rigid or less structured PTO policy depends on the company culture you want to build and the workforce you want to attract. If you are new to the industry and target young professionals who don’t have families, then a PTO policy is an attractive quality.