How to Create a PTO Policy for Your Business

Are you constantly bombarded with random leave requests from your employees?

Or do you notice frequent absenteeism without prior notice?

It’s a cue to have a structured PTO policy. It helps employees take planned leaves from work, promotes work-life balance, and increases job satisfaction.

In this blog post, we’ll share how to create a PTO policy with relevant examples. Let’s get started!

How to Create a PTO Policy (with Examples)

Understanding Paid Time Off (PTO)

Paid time off (PTO) is a benefit that allows employees to take time off for vacation, sickness, or personal reasons while still getting paid. The regular breaks give employees the time to recharge and regain their focus, promoting employees’ physical and mental well-being.

However, an efficient PTO policy is important to ensure a balance between work commitments and employees’ personal needs. It provides a structured way for organizations to handle employee leaves without any interruptions in the workflow.

A PTO policy sets a standard procedure for requesting, tracking, and managing leaves and reduces administrative load. For example, when an employee requests a leave, you can quickly look up their total leaves in your HR system and grant or deny them accordingly.

Plus, a well-structured PTO policy promotes trust among employees as they have the freedom to manage their personal commitments without worrying about loss of pay.

You can implement different PTO policies depending on your business’ needs. For example, if your workforce mainly comprises senior professionals and you want to focus on building trust, you can offer unlimited PTO.

Here are the different types of paid leaves you can add to your PTO policy:

Sick leave

Paid sick leaves or medical leaves are available for employees to take care of their health or recover from an injury. It usually works in an accrual method, where employees earn one hour of sick time for every 30-50 hours worked, depending on the policy.

Even though there is no federal law in the US for providing sick leaves to employees, many states, including Arizona, California, New York, and Massachusetts have passed local laws to make paid sick leave mandatory for employees. You need to check the state laws before drafting a PTO policy.

Public holidays

You can also offer paid time off to employees on any religious, state, or national holidays. The list of paid holidays depends on the country you’re in and the work culture of your organization. Global companies usually allow their employees to take up to 10 optional public holidays in a year, depending on their location.

Bereavement leave

Bereavement leave, also known as compassionate leave, allows employees to take time off to grieve the death of a loved one. Although there are no federal laws around bereavement leave, companies offer it out of compassion.

Family leave

Family leave is usually paid parental leave of up to 12 weeks on the birth of a newborn or adoption of a child. It also includes caregiving leave where employees take some time off to care for a family member with a critical health condition.

Voting time

Employees get this type of paid time off for presidential and local elections. Usually, voting time off is limited, as employees need only a few hours to vote.

Check with your state to see if you need to offer paid or unpaid time off for voting. For example, the State of California Law allows employees to take up to two hours off to vote without losing any pay.

Vacation days

This type of PTO becomes handy when employees want to go on vacation, spend time with families, or simply take a break from work. Vacation leaves are offered to employees after completing a specified tenure of service, and they increase based on the number of years your employees complete at work.

A survey by the US Bureau of Labor Statistics says that 34% of private industry workers get 10-15 days of paid vacation leave in a year after completing one year of service. 32% of workers get 15-19 days of paid vacation leave after completing five years of service.

Sabbatical leave

Some companies also offer sabbatical leaves of usually 4-6 weeks to eligible employees to take an extended break from work. It could be to take care of mental health, pursue higher studies, or focus on self-development or career training.

For example, ClickUp offers a five weeks’ sabbatical leave for employees who have worked for at least four years with us.

Types of Paid Time Off Policies

Now, let’s discuss the different types of PTO policies you can consider for your organization.

Traditional leave

A traditional PTO policy offers employees a set amount of paid time off under various leave buckets—vacation, sick leave, personal days, etc.

You may consider gradually increasing the number of leaves after the employee has completed a certain period of time at the company.

Deloitte has a traditional leave policy. It has 39 days of yearly PTO, segregated under various buckets like privilege leave, sick leave, casual leave, and additional medical leave.

Banked PTO

Banked PTOs are similar to traditional PTOs. Here, too, you can assign employees a set number of paid leaves. However, unlike multiple leave buckets, all the leaves are deposited in one ‘bank,’ and there are no segregations.

Employees can take banked PTO from their leave banks for whatever reason and need not worry about how many leaves they have consumed under which bucket. This PTO policy type is a good option if you’re a lean team.

Accenture offers its employees banked PTOs for 13 to 27 days per year, depending on the level and tenure of the employee.

Unlimited PTO

This policy allows employees to take as much time off as they need. There is no set number of days. The biggest benefit of unlimited PTO policy is that it offers employees workplace flexibility and allows them to take time off at their convenience. So, be it a doctor’s appointment or spring break, employees can take breaks from work freely.

According to a Harris Poll survey, 60% of professionals in America have more than 10 paid days off per year and an additional 7% employees have unlimited PTO.

Although it seems like you’re giving ‘unlimited’ time off, it’s a great way to demonstrate employee trust. This PTO policy works best if you’re a startup and want to attract top talent. It also works well if you don’t have the bandwidth to monitor employee leaves and track accrued time off policy.

Netflix offers an unlimited PTO policy. As the company mentions, “We don’t set a holiday and vacation schedule, so you can observe what’s important to you—including when your mind and body need a break.”

Accrued PTO

Accrued PTO is earned after the employees work a certain number of hours in the organization. Employees can use their accrued leaves for vacation, taking care of health, or personal time. Accrued PTO is like money earned and saved in the bank that can be used when needed. Some organizations allow employees to en-cash their unused accrued leaves.

Flexible PTO

Flexible paid time off lets employees take leaves as and when needed without accruing or earning them. It can be bundled under one bucket that includes all usable leaves, such as bereavement leave, personal time off, vacation time, and sick days. The biggest benefit of flexible PTO is that, unlike traditional PTOs, employees don’t need to request leave in advance.

Buffer has a flexible time off policy for its global remote team that allows employees to take time off when they need so they feel their best and thrive. It offers at least three weeks of paid time-off.

Even Google offers flexible PTO to employees.

How to create a PTO policy Google — *via* *Google*

How to Create a PTO Policy for Your Team?

Creating a PTO policy for your team can be overwhelming, especially if you’re doing it for the first time. Here’s a guide to help you draft a PTO policy:

1. Understand legal requirements

Since labor laws for paid time off vary as per the location, check the local laws and regulations on leaves in your jurisdiction while crafting the PTO policy.

For example, the Federal Family and Medical Leave Act or FMLA in the U.S. makes it mandatory for companies with at least 50 employees to provide job-protected parental, personal medical, family caregiver, and military exigency leave.

Some states also require employers to track PTO balance, so check your state law if you need to do so. Once you propose a program, check the industry standard in which you operate. For instance, New York’s Paid Family Leave Program mandates organizations purchase paid family and medical leave plans through a private insurance market.

💡Pro Tip: Use ClickUp Docs to outline the PTO policy structure and create a list of legal requirements. Share it with your team and get real-time feedback.

ClickUp Docs to create a PTO policy — *Use ClickUp Docs to draft PTO policies and collaborate with your team*

2. Determine employee eligibility for different PTO types

Next, determine the eligibility of employees and how much leave one is entitled to. Classify employees based on their levels, job nature, or company tenure to set employee eligibility. You can categorize employees in the following way:

Full-time salaried employees are eligible for unlimited PTO policy
Part-time, seasonal or hourly employees are eligible for traditional PTOs or no PTOs
A full-time employee must complete 90 days before they can use their PTOs

💡Pro Tip: If you have a larger team that makes it difficult to set and manage employee eligibility categories, try using advanced HR software like ClickUp. ClickUp’s HR Management Platform can help you keep everything on point. It lets you track employee service period, performance, engagement, and development in a single platform.

3. Choose the right PTO policy

Be careful while choosing the PTO policy for your organization. You can offer flexibility within the larger PTO policy, like paying out of the PTOs during separation, the ability to carry time over, or unlimited vacation time.

You can also break down PTO for vacation, personal time off, mental health days, sick leave days, etc, depending on what the employees want and what aligns with your overall company vision.

For example, if you’re highly focused on employee wellness, giving mental health time-offs show that you genuinely care.

Here is how you can decide the best PTO policy for your company:

Type of Policy	Description	Purpose
Unlimited PTO	Employees can take as much PTO as they need, with no set limits	Suitable for a trust-based work environment where employees are expected to manage their workload responsibly
Flexible PTO	PTO can be used for any purpose, combining vacation, sick, and personal days into a single pool	Great for companies that value flexibility and want to reduce the complexity of managing different types of leave
Accrual-based PTO	Employees earn PTO gradually over time, based on hours worked or duration of service	Ideal for companies that want to encourage employee retention and promote an equitable work culture
Sabbatical PTO	Extended paid leave is offered to eligible employees after a certain period of service to pursue personal interests or take care of health	Best for organizations that want to reward long-term employees
Fixed PTO	Employees receive a set number of PTO days at the beginning of the year	Effective for businesses that want predictable PTO costs and simpler administration

4. Outline the approval process and payout procedures

The next step is to determine the PTO approval process to prevent PTO misuse and unscheduled absences. For example, if not an emergency, employees must submit PTO requests to be reviewed by supervisors or managers and HR.

Define how the PTO approval process should work in your PTO policy:

How much advance notice should an employee give in a non-emergency situation?
How to apply for PTOs in emergencies (if needed, define the emergency situation like childcare or illness)?
Who will approve the PTO?
What happens when the PTO is not approved within a certain timeframe?

For example, if the manager doesn’t approve the PTO in a week, it gets auto-approved.

You can use ClickUp’s PTO Calendar Template to track employees’ leaves and streamline the leave approval process. This template makes it easy to manage and track employee leave status and visualize their time-off. You can view staff availability, reduce the risk of scheduling conflicts, and identify gaps in plans for staffing needs.

With this template, you can:

Organize leave schedule for all teams in one place
Visualize how many days and hours are taken off by each employee
Plan staffing needs

Download This Template

5. Draft the policy

Once you’ve done your research and created a PTO policy structure, it’s time to add relevant details and prepare a policy draft.

Share the first draft with the management, legal team, and relevant stakeholders to gather feedback. Make improvements as per the feedback and share the policy with employees.

💡Pro tip: You can also use ClickUp Brain, ClickUp’s AI Assistant, to create a PTO policy. Here is an example:

Use ClickUp Brain to draft a PTO policy — *Create PTO policies using ClickUp Brain*

Pros and Cons of a Structured PTO Policy

PTO policies improve employee productivity, wellness, and job satisfaction, and help attract and retain employees. If you’re considering implementing a PTO policy, you can reap several benefits. Some of these are:

Improved employee productivity: A recent Deloitte survey reveals that 45% of workers feel burnout. PTOs ensure employees can take breaks freely without worrying about finances. This helps employees recharge their mental and physical health, improving productivity
Higher employee retention: According to Forbes, mandatory paid time-off is one of the top benefits for employees want from their organizations. Having a structured PTO policy can lead to better employee satisfaction and higher retention.
Attract talent: Since professionals are seeking better work flexibility, a generous PTO policy can help you attract quality talent

Although PTOs are highly encouraged, there could be a few drawbacks, too.

High labor cost: Companies that offer PTO may have high labor costs, especially during peak business seasons
Misuse of the system: Some employees can abuse the PTO system. For example, if a company has an unlimited PTO policy, they can be misused, disrupting the team’s workflow and productivity

Changing and Updating PTO Policies

You can change your PTO policies mid-year or whenever the need arises. For example, during 2020, many organizations changed their PTO policies as employees deferred their vacation plans amid the lockdown.

However, when recalibrating PTO policies, consider the following:

Ensure they don’t conflict with the employee’s current and/or accrued PTO benefits
Verify that your updated PTO policies comply with the local laws
Include a clause describing what happens to an employee’s PTO accrual in case of layoffs. For example, many companies offer payouts for the remaining days of the PTO
Consider the impact on productivity and how managers can cover the loss of productivity with temporary staffing.

Once the PTO change is in effect, update all policies at a central platform (like the company’s policy portal) or employee handbook as a single point of truth. Assign HR spokespersons to whom employees can reach out should they need clarification.

Whenever you change and update PTO policies, the HR department must have a clear plan to communicate the policy changes to the employees effectively.

To streamline policy change communication, you can use ClickUp’s Policy Memo Template. It helps you communicate policy changes in a clear and organized manner. You can add the reasons for change in policy, seek inputs from stakeholders, and set guidelines for following the updated policy.

The template helps you:

Organize all existing and new policies in one place for quick reference
Highlight policy changes
Craft an actionable plan to implement the new policy

Download This Template

Create your PTO Policy with ClickUp 🚀

Whether you’re creating or updating your PTO policy, you need a well-thought-out plan to execute it, without disrupting the workflow. While the above guide will help you strategize crafting your PTO policy, use ClickUp to break down the overall PTO policy drafting process into smaller and more manageable chunks. This will help you track the progress of your PTO policy creation.

You can also leverage ClickUp’s features and templates to streamline your leave management system. It will help you track employee leaves, ensure faster approvals, and never miss out on anything important. Sign up on ClickUp for free to create a comprehensive PTO policy!

Questions? Comments? Visit our Help Center for support.

People Management

How to Create a PTO Policy (with Examples)

Start using ClickUp today