Paid Time Off policies – What works best for your organization?

Summer is coming and this means many of your employees are planning their family vacations.  It’s also allergy season here in the Virginia area which has knocked quite a few people off their game with folks having to take time off to visit doctors.  I’ve even had a bout of bad luck with illness recently.  It got me thinking about all the various policies I’ve encountered in handling sick time, vacation time, and other paid time off such as parental leave, bereavement, and so forth.  In general I’ve seen two main policies – central bucket of hours used for any reason or distinct buckets of hours following certain use rules.

The central bucket of hours policy is typically called a Paid Time Off allowance or PTO allowance.  This is a defined set of hours earned each year to be used for vacation, sick time, personal time, or any general time off like floating holidays.  In these scenarios, I still see separate allowances for Jury Duty, Bereavement, and Parental Leave as those items are unique and occur infrequently.  They are not so much hour allotments but general time tracking categories for reporting and monitoring by HR.

There are a lot of Pros with a PTO allowance:

• simplified tracking of vacation and sick time
• use for personal time off (no ‘I’m sick of work’ sick time to avoid using vacation)
• inclusion of PTO allowance in capacity planning allows for conservative revenue earning projections
• annual allowance simplified
• single set of rules for use of PTO

The cons of a PTO allowance are really more about personal challenge or attitude of your employees. For those of your employees that have a lot of illness in the family, they may be hurt by a PTO policy simply due to the use of having to use the hours for care of a sick child or family member.  Of course, this can all be handled by conversations with HR.  The other potential downside is that people feel like they have extra vacation, which essentially they do since the hours are all treated the same, so you may see people take more time off since they do not have to account for specific reasons – sick time, for example.   This definitely means the full PTO allowance should be included as part of the capacity and revenue plan for the year.

A majority of my career I worked for companies that tracked time off hours in distinct buckets such as vacation allowance, sick time allowance, floating holidays, and so forth.  Each bucket had a set of rules about using them.  Vacation could be used any time.  Sick time could be used but after 3 consecutive days you needed a doctor’s note explaining the illness.  Floating holidays were granted but had to be taken in whole day increments.   None of these rules probably surprise you, but your timesheet system needs to be able to handle the rules – otherwise, your HR department is spending time with spreadsheets going through the numbers each week to make sure the rules are being followed.

The Pros of using distinct buckets, however, include

• easy identification of where time off is spent by employee
• time off is used by specific purpose – sick time is not used for vacation
• capacity may increase by considering only vacation/holiday time instead of including sick time
• allows controls by HR

After working in and with many companies, I’ve designed by own policy which takes the distinct bucket approach and adds a twist – no defined sick time allotment; just use it when you need it.  The vacation allotment is factored into capacity, sick time is not.  I never really did understand the sick time allotment in the distinct bucket approach as you are either sick or you’re not, you either have a sick child or you don’t, you either have to care for a family member or you don’t.  It’s not like you can predict how sick you’ll be in a given year.  But if you can see into the future, mind if I give you a call?….I’m just sayin’.

A selfish shout-out to my team that pulls together when one of us is ill and still delivers quality and customer empowerment to our high standards!  We never leave a person hanging!  Thanks for everything!