Types of PTO: What You Need to Know

Vacations, sick days, shift swapping – can you think of more types of paid leave? The variety of them is more extensive than you might think, and company policies regarding PTO can differ drastically. For some, it's a competitive advantage and a way to make the workplace attractive for potential hires, while for others it's simply an obligation posed by the law. In any event, employees need time off work, which means that employers have to be transparent about how they grant PTO and should know how to manage paid leave optimally.

In this article, we're going to cover the most common PTO types, explain how typical paid leave policies operate, and give some tips on how to organize time-off procedures for greater efficiency. 

What Is PTO?

Paid time off (PTO) refers to any period of time when an employee is not working but keeps receiving wages. This comes in handy for those who need to take a break from work for various reasons, including taking care of physical and mental well-being, vacation time, public holidays, sick days, and more.

Keep in mind that PTO requirements might vary depending on the government and company policies. Employers must clearly communicate the specifics of the PTO benefits to their employees, add such details in employment contracts, ensure everyone knows how to request paid time off, and make the submission procedure of time off request forms for employees simple.

How Does PTO Work?

PTO policies usually provide a set number of paid days off taken by employees for various reasons.

There are different systems for handling PTO requests and tracking employee time off. Some companies might be using online forms, rudimentary spreadsheets, special software or HR tools, or just text messages. Time-off requests should be approved by a manager who in turn informs the team and accounting department about someone's leave. The latter one calculates the PTO accruals.

It's also worth noting that rules can differ not only by country or state but even within companies. Therefore, when crafting a paid time off policy plan, you must comply with local regulations, as PTO is not a one-size-fits-all matter.

Kinds of PTO Policies 

There are three most common types of PTO policies: traditional PTO, unlimited PTO, and PTO bank. Let's go over the main pros and cons of each type.

Traditional PTO

Traditional PTO involves accruing a set number of paid time off days depending on your position, tenure, and working hours. Employees are allowed to leverage this accrued time for different types of paid leave, e.g. sick days, vacations, or personal matters.

Companies that follow the traditional PTO model establish specific accrual rates, use-it-or-lose-it policies, payout conditions, and other guidelines. For instance, some policies might offer employees 10 days off during their first five years of service, increasing to 15 days afterward. Other policies might allow employees to accrue 4 hours of paid leave for every 40 hours worked, effectively giving them one day off every two weeks.

Unlimited PTO

Unlimited PTO is quite self-explanatory: employees can take as many days off as they want and there are no restrictions on how long they can be away from work. This policy might seem more appealing to companies as it doesn't require much paperwork and daunting calculations.

Nonetheless, it wouldn't be honest to claim that "unlimited" PTO has no limits. There's always an acceptable limit, which can be rather frustrating for those employees who are eager to take more days off but aren't allowed to by their employer. Moreover, such "unlimited" benefits can sow discord in the workplace when some employees get PTO approval but others don't. 

PTO Bank

A PTO bank policy operates as a combination of the two aforementioned types. It borrows the accrual system of traditional PTO as well as the agility of unlimited PTO. Employees obtain a set limit of paid days off, which includes sick leave, vacation time, and others that they can make use of throughout the year. Depending on company rules, you might either accumulate paid days off (e.g., over a period of 3 months before being eligible to use them) or receive the full PTO benefit upfront.

The fact that sick leave mingles with vacation time can lead to reluctance among employees to take the former one. They might be unwilling to sacrifice their long-awaited holiday for bed rest. So, this can result in the main drawback of this policy – employees working overtime and experiencing burnout.

10 Types of PTO

There are different types of PTO that you should consider for your policy. We've outlined the 10 most common and essential types to include in your plan.

Vacation Requests

Vacations are among the most widespread types of paid leave around the globe. A vacation PTO request provides a great opportunity for employees to take some time away and recharge their batteries.

The number of paid vacation time varies across companies and countries, but on average, American employees receive around 10 days of paid leave per year, and the same goes for Canada. In contrast, there are approximately 20 holiday pay days in Australia while employers in the UK provide about 28 days of leave. Most companies require their employees to submit requests well ahead of the actual vacation dates to ensure the team isn't short-handed.

Holiday Requests

Some PTO policies can cover government days off. These days may vary from company to company and are generally indicated in the benefits packages. However, they normally include commonly observed federal holidays such as Christmas or Thanksgiving. In some cases, companies offer floating holidays, allowing employees to use paid time off to celebrate religious or other special holidays that are not widely recognized.

Paid Sick Leave

This type of paid time off request is of great help if a person catches a cold or something more serious, like the flu, a fever, or a medically required surgery, and needs some time to recover. Additionally, it includes a family medical leave that allows employees to take time off to look after a family member with a serious health condition. 

Nevertheless, be aware that this type of leave is not mandatory in all states, as it depends on specific state rules and laws. Furthermore, providing a document from a health care provider, like an official doctor's note or other medical certification to validate the absence, is quite common.

Personal Time Off

Personal time off is one of the most general PTO categories that can be utilized for tackling personal matters or just attending some important events like your child's soccer match. Thus, companies might refer to it as an "illness" day or simply a day off to handle personal matters. By offering flexible PTO options, companies allow employees to balance their work and personal life more effectively.

Compensatory Time

Mentioning other types of time off requests, compensatory time off (CTO), or comp time, involves getting days off for working overtime instead of a bonus payment for the extra hours. This PTO type is frequently used as a case-by-case solution to unexpected deadline issues.

Such accrued time can be leveraged later to provide employees with much-needed breaks without affecting their regular vacation days. By using comp time, employees can manage their workload and personal time without burning out from extended periods of working extra hours.

Unpaid Time Off

Unpaid time off (UTO) means taking time away from work without any compensation, which is is the primary distinction between UTO vs PTO. Employees may request UTO if they've already used up their PTO days, or in case of unforeseen circumstances like family emergencies, medical treatment that doesn't count as sick leave, or personal matters. This can be quite advantageous for companies as they end up paying less.

Of course, it doesn't imply that employees can just ditch work without letting employers know in advance. There are specific types of unpaid leave that are allowed in companies, and UTO requests should be approved by a manager first. 

Sabbatical Leave 

A sabbatical leave is a longer Leave of Absence (LOA) that can be taken to study or travel. This type of leave is most commonly used by academic professionals who are in pursuit of interests such as traveling, journaling, conducting research, volunteering, or others. This enables employees to keep their positions while being away for an extended period of time.

It goes without saying that not all companies offer this particular leave. For those that do, they might set strict timeframes. The length of a sabbatical can range from a few months to a full year depending on the company's internal policies. 

Parental Leave

Parental leave refers to taking time off to care for a newborn or handle emergency childcare situations. According to US laws, companies are not required to provide paid maternity or paternity leave. Regardless of that, some states and private companies may grant paid parental leave as part of their benefits package. What is more, eligible employees can get a 12-week unpaid leave, which also ensures job protection during their absence.

On the flip side, the specifics can vary significantly from country to country. In some places, paid maternity leave can last up to three years. Therefore, the duration depends on national legislation, labor protection laws, and individual company policies.

Bereavement Leave 

Bereavement leave, also known as sympathy leave, is time off that can be requested to mourn the loss of a family member, close friend, or loved one, as well as to make funeral arrangements and attend the services. Many companies acknowledge how emotionally hard it is to part with loved ones, hence include bereavement leave in their benefits package among the types of paid leave to ensure employees have the support they need during difficult times.

Jury Duty

Jury duty is a PTO policy that allows employees summoned to serve as a juror or witness in court cases to take some time off. Some states require employers to provide paid jury duty leave to employees fulfilling their civil obligations but on condition that they submit a confirmation document. Be mindful that regulations vary by state, and not all employers are obligated to offer paid leave for such types of time off as jury duty.

Tips on Managing PTO Requests

Managing employee PTO requests can be a headache for HR and accounting departments but implementing effective strategies and techniques can facilitate the process. Here are some recommendations for handling employee time off requests more efficiently.

Create a PTO Policy

The first and foremost thing you should do is to establish rules for requesting time off. You should clearly outline the types of paid time off available within the company and specify procedures for submitting requests. It’s vital to mention:

• time off limits per month, quarter, or year (you should include the maximum number of days off employees are permitted to use within each of these periods);
• mandatory time off (how many days an employee is obliged to take per year; in the USA, there are no statutory paid vacation minimums, allowing companies to establish their own norms, while other countries can have a fixed minimum);
• how to use PTO leave (as such, you should outline whether employees can take consecutive days off, are allowed to take leave simultaneously with a teammate, lead, or boss, if unused paid time off can be rolled over to the next calendar or contract year as opposed to a "use it or lose it" policy);
• how far in advance employees need to request PTO (for example, you might obligate employees to submit vacation requests at least two weeks in advance);
• the circumstances when last-minute paid time off requests are allowed (for instance, in case of family emergencies, unexpected personal matters, urgent childcare needs, bereavement, and more);
• working day shifts and comp time rules (when defining how to submit PTO requests for such cases, remember to mention if employees are entitled to shift bank holidays or weekends with working days, or get an extra day off for working overtime);
• the approval process (line out how to get PTO approved, who approves it, how long this procedure lasts, and whom employees should submit their request to, for example, based on the approval procedures, they might need to contact their manager, supervisor, or might also have to additionally inform the accounting department).

Most importantly, don't forget to review the laws in your state or country as they can prevent you from incorporating or canceling certain PTO perks.

Organize Your PTO Process 

Ensuring your time off request procedure is optimal and then managing time off requests isn't a walk in the park. It requires careful planning and clear communication to make sure everyone understands how to request and submit paid time off.

As such, it's essential to make the time off request policy transparent and the submission procedure simple and accessible for your employees. Consider posting this information in the workspace or displaying it right where employees submit their requests.

Creating a PTO request form is also an important step. Think through which fields the employee time-off request form must include to ensure the time-off management process is as efficient as possible. This form should capture the following details:

• employee name;
• time period of the requested days off;
• reason for requesting time off;
• PTO type;
• manager's name;
• any additional comments.

But the good news is that all of this stuff doesn't have to be handled via rudimentary and insufficient spreadsheets. Many teams make time off procedures easier for both employers and employees and develop specific PTO functionality in the used CRM or utilize special standalone PTO tracking software. And if your company is using Slack, OrgaNice offers an absence tracker that's implemented right in the Slack workspace. It can simplify all the PTO-related processes described beforehand.

Here's what OrgaNice can automate and do:

• eliminate manual PTO management; 
• automate time off submission according to time off request rules;
• clearly show the PTO policy;
• track the number of used time off days by type for each employee, showing how much is available;
• notify your team about absences in corresponding Slack chats;
• depict leave types in the person's Slack status using emojis;
• update and illustrate team time off on a calendar;
• sync up bank holidays around the world.

Plus it features a straightforward interface and has other cool PTO-related features to offer. To get started, you should add the OrgaNice time off tracker to your Slack workspace, enable the "Time Off" feature, and choose the countries where your teammates are located. Once you've set up time off and holiday parameters, you can easily manage PTO requests directly within Slack. 

For employees, requesting time off is a breeze: they simply click the "Request Time Off" button, select the PTO type, specify the dates, choose their manager, and submit the request – all in just a few seconds.

Final Thoughts on PTO Types

Now that you're aware of the different types of PTO and necessary time off procedures, you can move on to setting up your company's paid time off policies and thinking up possible ways to organize all the related procedures effectively. 

If you're on the same page with us and use Slack as a workspace, consider leveraging tools like OrgaNice to take your absence tracking and communication to the next level. It'll ensure that your absence management is as organized and efficient as possible and help you simplify manual tasks. The tool can do more than track paid time off and has lots in stock to boost overall employee satisfaction, make HR processes smooth and clear, reduce miscommunication, and keep everyone on the same page. And the cherry on top is pricing, the tool is free if your team is 36 people or smaller. Don't hesitate to reach out if you have any questions or need further assistance!

FAQ

1. What are PTOs?

PTO means paid time off and allows employees to take time away from work while still receiving their regular salary. According to the PTO meaning, it typically includes vacation days, sick leave, public holidays, and personal days. This policy enables employees to tackle personal issues and maintain work-life balance without financial loss.

2. What are some of the types of paid time off?

There are many types of PTO such as an employee vacation request, sick leave, personal time off, bereavement leave, compensatory time, jury duty, and others. Each type allows employees to handle different aspects of their personal life while still receiving their regular pay.

3. What can PTO be used for?

If you're wondering, "What is PTO used for?", paid time off requests can be used for various purposes, including vacation time, recovering from illness or attending medical appointments, handling personal matters, celebrating public holidays, grieving the passing of loved ones, fulfilling civil obligations in court, and bringing up children.

4. What is standard PTO policy?

Typical paid time off policies outline how employees accrue and use paid time off, typically including vacation days, sick leave, and personal days. It clarifies accrual rates, submission and usage procedures, and rules for vacation carryover or the "use-it-or-lose-it" policy. There's no one-size-fits-all policy, as rules can vary not only from country to country but even in different companies.

5. What is UTO time off?

UTO is unpaid time off that enables employees to take some time away without pay. This can be beneficial for those who have already used their paid days off or if the company's policy doesn't cover a particular type of paid leave request. The main difference between PTO vs UTO is that, unlike PTO, employees taking UTO won't be compensated.