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How to Properly Manage Paid Time Off (PTO)

Many companies are now offering paid time off (PTO) as opposed to traditional vacation and sick day policies. With a PTO policy, employees can use accrued time-off for a variety of reasons, including vacations, doctor’s appointments, or other personal reasons. Businesses have the option of allowing workers to either accrue time-off over the course of employment or in some cases are front-loaded the hours at the start of employment. 

In order to have an effective PTO policy, however, it is important for each company's HR to closely track the accrual and use of PTO, as well as any restrictions on PTO accrual.

Tracking and Managing PTO

The following practices can help managers successfully track and manage the accrual and use of paid time off. 

Understand the Needs of the Company

How a company tracks and manages the use of PTO varies from business to business, so it is important to identify the unique aspects of one's own company. Does your organization have clear guidelines for PTO usage?

If not, a more hands-on approach to monitor employees’ PTO may be needed. For example, you could require employees to give at least one week’s notice before using PTO, with the exception of being sick or having another emergency. This can help reduce the risk of employees taking advantage of PTO. 

If your organization has already established clear directives for employees to follow when using PTO and your company culture is designed to embrace PTO policies, you may not have to do much work monitoring PTO usage.

Require a Reason for PTO Requests

It is up to your company to decide whether or not you should require your employees to explain what they’re using their PTO for.

Generally, employees can use their PTO however they would like. As a result, many managers don’t feel comfortable asking “why” when an employee submits a PTO request. However, it sometimes makes sense to do so. 

For instance, if an employee asks off during a particularly busy time and the impact of that absence would be significant, it may make sense to inquire as to the reason for their request. Then, depending on their answer, ask them if they could move it to either before or after the upcoming busy period for your business. 

Important for employers to note is that asking "why" too frequently, or consistently denying  PTO requests may become problematic.

PTO boosts employee morale and productivity and is an attractive retention tool—denying PTO requests often or appearing too intrusive may discourage employees from using this benefit at all, or worse, drive them to a new company.

Avoid and Be Aware of PTO Abuse

There are essentially two options for allotting PTO to employees, and both can lead to misuse or abuse of PTO.

Businesses that frontload PTO to employees at the start of employment need to be on the lookout for employees who use all of their PTO abnormally early in the year or save it all until December. If employees use all of their PTO early in the year, they will have no safety net for illness, injury, or emergency days later on in the year.

Unfortunately preventing this can be difficult. One method is by allowing employees to accrue PTO hours as they work so that they don't have an excessive amount of PTO to abuse to start with. 

If your company allows PTO to be rolled over to the next plan year, an employee may save their PTO until the following year so that they may be able to take as long as a five-week vacation.

To prevent this, companies should consider not allowing rollovers or capping rollovers for a certain amount of hours. This way an employee who does not use any PTO will lose all or a large portion of it at year’s end. 

Furthermore, it is vital that HR professionals be on the lookout for PTO misuse and speak with employees when it happens. Though it is ultimately the employees’ choice on how they choose to use their PTO, notifying them of the potential impact of their choices may be enough to remedy the issue.

Ensure Clear PTO Policies

It is critical that your PTO policy is communicated well to your employees. In one study it was found that in 2015, 658 million vacation days went unused. PTO is a valuable tool that can lead to less burnout and improve employee morale, productivity, and retention. If you want your employees to reap the benefits of PTO, don’t discourage them from using it by confusing the issue with mixed messages or an unclear policy. 

Final Thoughts on Managing PTO

It is important for HR and managers to properly track and manage the use of PTO. Without doing so, businesses can be left open to the risk of PTO abuse, drops in performance and productivity, increases in employee burnout, and high employee turnover rates. 

Managing PTO can be difficult, especially for businesses with large numbers of employees. If your business is struggling to track PTO, then it may be time to seek help from a payroll and HR company. To see how PayTime is already helping countless businesses with PTO tracking, as well as time and labor management, contact us today. 

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