Are your PTO policies ready for a summer full of vacations?
While time off isn’t necessarily a problem, it raises concerns around whether employees are taking the right amount of PTO, whether the necessary work is getting done to keep your business running, and how team members will cover for each other when so many people are out. As COVID-19 case numbers remain lower than in previous summers, we will likely see an increase in PTO use over the typical summer vacations we’ve seen in pre-COVID years.
With those challenges in mind, now is the perfect time to look at your PTO policies in preparation for the summer months ahead. Keep reading to learn how to effectively manage your PTO policies this summer.
What is PTO, and how does it work?
PTO is a standard part of compensation packages for salaried (and sometimes hourly) employees. PTO allows employees to earn or accrue time off that they can then use for scenarios where they might need to miss work, like doctor’s appointments or vacation time. Some employers also include sick days in the PTO category, while others consider PTO and sick time as two separate categories.
What are the benefits of offering PTO?
The most apparent benefit of PTO falls on employees who have the flexibility to take breaks from work as needed. Whether they have necessary plans that fall during work hours or need a breather from the work world, PTO provides the opportunity to take time off periodically and maintain a healthy work-life balance.
For employers, one key benefit is a more engaged and present workforce. Robust PTO policies can also help attract and retain top talent in a competitive job market. Offering a clear PTO policy can simplify HR administration tasks when employees need to miss work. Because there’s a transparent process in place, less guidance is required to resolve one-off cases.
Types of time-off policies and procedures
There are a few common types of PTO policies to explore if you’re creating a new PTO process. Take a look at the options below and consider which might best fit your organization.
Here are a few questions you can ask to help determine which PTO policy is right for you:
- How do your employees earn vacation, personal, or sick time (annual allowance, per hour, or per pay period)?
- When does the plan reset every year (hire date, custom date, or calendar year)?
- How do you plan to handle carryover (clear unused hours, carry over a fixed amount, or all hours rollover)?
1) Accrued PTO
The accrued PTO model requires employees to earn time off according to the time that they’ve worked. Your payroll provider will provide a paycheck calculator to determine the accrual amount based on pay frequency and hourly vs. salary. Some employers also allow for “negative PTO” under an accrued system, which means that employees can use PTO that they haven’t actually accrued yet and earn it back after they return.
A good PTO accrual rate is 4 hours per bi-weekly pay period. At this rate, you’ll earn 104 PTO hours (13 eight-hour days) over the course of the year.
2) Annual allowance
Employers can offer a fixed amount of time of PTO per year. Annual allowance PTO can reset on the employee hire date, the calendar year, or the company’s fiscal year. You will also need to decide if you will allow all or a fixed amount of PTO carry over into the following year.
The average PTO rate is 10 days a year for employees who have worked for their company for at least one year. However, that does not include sick days or paid holidays, which account for another 7-8 days of paid time off, on average.
3) Unlimited PTO
Unlimited PTO is becoming popular among modern companies, and it operates under the expectation that employees will take time off when they need it without abusing the “no limitations” policy. Interestingly, employees with unlimited PTO often take less PTO than their counterparts with accrued policies because of the accountability factor and the perception that the time off is less deserved. To combat this challenge, many employers with unlimited PTO policies add a minimum mandatory time off, like one day every month or one week every quarter.
Best practices for summer PTO prep
As mentioned above, summer is one of the most challenging times for HR managers in charge of PTO policies and day-to-day enforcement. Here are a few best practices to cross off your to-do list to save you from potential headaches over the coming months.
Set expectations when managing PTO requests
Employers all handle PTO approval differently, so make sure to communicate with employees so they know what to expect before putting in their requests. Some employers approve all submissions immediately. Others have a “first come, first serve” policy to ensure that enough team members are present to maintain daily operations, while others have some times of the year blacklisted from PTO for events or busy seasons. Whatever you decide, make sure employees know your stance ahead of time so they can plan accordingly.
Here are some practices you can use to help manage an increased influx of vacation requests:
- Early deadline
Consider requiring all summer vacation requests to be submitted by a specific date. Choose a reasonable deadline based on your business needs.
Some employers provide incentives for employees to take time off during less desirable times of the year. For example, some offer an extra day of vacation or premium pay for working during peak vacation periods.
- Blackout periods
Some employers implement blackout periods during which vacations are off-limits. This can help employers meet demands during peak business periods.
Discourage working while on vacation
Next, both you and your employees will more effectively reap the rewards of time off if it’s actually time off. Again, it’s up to you to set the tone and let employees know that they’re not expected to work while on vacation. To make this outcome possible, ensure managers understand how to guarantee that workloads are covered, and communication is well-managed in the employee’s absence.
Make employees feel comfortable taking time off
Similarly, some organizational cultures subtly send the message that the best employees are the ones that take the least time off. While this may look like loyalty or devotion to your company on the surface, it’s a fast track to burnout and overwork. Make sure your employees know that they can—and should—take time off regularly to preserve their own well-being. If you still have trouble with participation, don’t be afraid to implement mandatory time off to ensure PTO is used.
Consider the outlier cases
Last but not least, take a moment before summer to consider how you’ll handle potential outlier cases. What will you do if every team member asks to take time off simultaneously? What will you tell employees who want to take six weeks off at once to travel? How will you approach employees who insist that they don’t need or want time off in the foreseeable future? These are all possibilities you may encounter, so it’s best to decide your protocols in advance.
Summer is right around the corner, but thanks to these guidelines, you’ll know exactly how to manage PTO effectively during peak vacation months. Take the time now to make sure you have an up-to-date policy, and you’ll be ready for anything the next few months have to throw at you.
If you require additional benefits support, our industry-specialized team of HR consultants can help you tackle your HR responsibilities and navigate employee benefits, such as PTO, with ease. Contact us to get started today!