5 elements of a well-crafted PTO plan

Summer is officially here. Not surprisingly, employees use their paid time off (PTO) the most in the summer months, with the average time off request being 2.34 days. Taking time off to mentally decompress is crucial for employee well-being and organizational success. When employees are allowed to step away from their work responsibilities, they can rest, recover and reset their minds.

Without sufficient downtime, the risk of burnout is real. A Deloitte survey found that while 87% of professionals said they have passion for their jobs, nearly two-thirds also said they frequently feel stressed or frustrated on the job — 18% said they feel that way every day. Taking time off to mentally decompress can help employees gain a refreshed perspective and return to work more engaged with increased productivity.

Read more:  Mental health leaves of absence are surging in 2024

The five elements of a well-crafted PTO policy

There is no "one size fits all" type of PTO plan, but the most effective plans have some similarities:

1. Types of leave — PTO policies typically include vacation and/or personal time and sick time. How those are divided depends on the company, its needs, and the needs of its employees. Some combine all types of PTO in one giant "bucket" for employees to use as they like; others break it down into a specific number of days for sick time, planned vacation time and personal days.Effective policies stress the importance of flexibility for their employees when necessary. This could be for unforeseen circumstances or could focus on an adjustment of policies to align with an employee's situation. Stressing flexibility to your employees is crucial.

2. Importance of mental health — Increasingly, companies are starting to include time for mental health days in their PTO policies. Some are also including non-traditional leaves of absence, such as for bereavement for family events such as a miscarriage, as part of their PTO plan. Additionally, different cities and states may have specific rules regarding employee PTO, impacting how a plan is set up.

Read more:  Are your unlimited PTO policies actually working?

3. Establish and communicate guidelines — In addition to leave, there are specific variables companies must consider when building a PTO policy. Will an employer's PTO accrue over the year, or will employees be given a set number of PTO days to use at the beginning? Another variable is whether to allow employees to carry over unused time to the following year. It's important for companies to be transparent and make sure their employees know how PTO accrues, and if their time off can be carried over. Additionally, employers should review any specific guidelines around PTO usage with their employees. For example, are there any periods or busy seasons when employers can't take PTO, is there a maximum amount of PTO days that can be used consecutively, etc.? Employees are seeking transparency and guardrails when it comes to their PTO plan.

4. Communicate PTO benefits effectively to employees — No matter the PTO plan implemented, the best plan is useless if employees don't understand what they're entitled to. 

Ideally, PTO information will be readily accessible to employees in multiple formats. For example, dispersing news about the plan through written or emailed memos and a page on the company intranet makes it more likely everyone will see the information, regardless of which platforms they prefer.

When making a policy change, whenever possible, include information from employee surveys or external data to support the change's necessity. It can head off employee questions or concerns and show that the company is thoughtful and deliberate in managing its PTO policy.

Read more:  Parental leave, PTO and job protection: 10 countries with the best labor laws

5. Lead by example — It's essential that upper management visibly buys into and supports the PTO policies it implements. Management should make it clear that they understand the need for employees to get time off and expect PTO to be used. If employees think taking time off is frowned upon, the plan loses its effectiveness in retaining talent.

What about unlimited PTO?

A small but growing number of companies offer employees unlimited PTO — primarily large companies with 5,000 or more employees. Under these plans, employees can take time off whenever and however long they like.

Unlimited plans have pros and cons. Because employees don't accrue time over the course of the year, the company doesn't have to pay for unused PTO when an employee leaves. It also tends to lessen the end-of-year rush when everyone takes off to ensure they don't lose accrued time.

The obvious downside is the possibility of abuse. Companies can largely avoid this by communicating clearly with employees: Take time off when needed, but make sure your work is still getting done.

Some companies have implemented a pilot program of unlimited PTO by first testing it with management-level workers. Doing so can give the company time to identify problems and work out the kinks before rolling it out to all employees.