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What Is Paid Time off?

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  • Written By: Alan Rankin
  • Edited By: Melissa Wiley
  • Last Modified Date: 21 August 2017
  • Copyright Protected:
    2003-2017
    Conjecture Corporation
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Paid time off, often abbreviated as PTO, refers to a scheme used by employers to regulate the amount of time employees can spend away from work and still be paid. Instead of separate systems for personal days, sick leave, and vacations, PTO plans assign a set amount of paid time off for each employee. The employee can then decide how best to use this time during a given period of employment, usually a year. Some employers use complicated systems to determine how much time off to give each employee. In some workplaces, employees can cash in unused time off at regular intervals or when employment ends.

Many employers, such as government or corporate offices, provide benefits to employees in addition to a salary. These benefits, sometimes called perks, can include paid vacation time. Employers are required by law to provide employees with a certain number of sick days per year; many also offer personal days that employees can use at their own discretion. Keeping track of these days for each employee can be a major task for the human resources departments of large employers. Beginning in the late 20th century, some employers began collecting all these days under the umbrella of paid time off plans.

Some employers use elaborate systems to determine the paid time off for each employee, assigning days based on factors such as seniority and performance. While some employees will use this time as needed in small increments throughout the year, others will save their time off to use all at once, such as taking an extended vacation to a distant location. Once an employee has accumulated the maximum number of days allowed by a PTO plan, employers have different policies in place. Some allow the employee to carry unused days over into the next employment year; others require the employee to use the days or lose them. A few employers allow the employee to cash in the days for an equivalent salary amount.

Paid time off plans offer many advantages for both employers and employees. Employers benefit because employees plan their days off more carefully than with traditional plans, often resulting in fewer actual missed days. Employees can choose to spend the time off any way they like, without specifying the use to the employer, although most employers still require advance notice when possible. This also works to employers’ advantage because employees will often provide this notice rather than pretending to be sick to take advantage of a sick day. Employees also benefit from being able to add unused sick days to a vacation or cash them in for pay.

There are some disadvantages of paid time off plans. Employees with poor planning skills may not make the best use of PTO plans. If an employee is used to three days of sick leave and two weeks’ vacation, for example, she may take three weeks’ PTO as vacation time, not allowing for personal crises or illnesses. An extended illness may wipe out all an employee’s time off for the year, leaving none for rest or planned vacations. Requirements of individual plans, such as using days off or losing them, may also be inconvenient for some employees.

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