The average private sector employee obtains 7 sick days and 11 vacation days after 1 year of employment with a single company. 62% of candidates consider PTO as essential when choosing a job. With a majority of candidates analyzing your PTO offerings, it is important to understand what you are offering, and how it can be of the most value to your employees – current and potential. To help navigate PTO, we’ve prepared this guide to help compare and contrast different offerings, as well as how a PEO can help with PTO rollout.
Unlimited PTO vs. Traditional PTO
As an emerging benefit, unlimited PTO has caught the eyes of potential employees. 72% of candidates express interest in having access to unlimited PTO with only 7% of employers offering the benefit. This makes unlimited PTO something that can ultimately set employers apart in the marketplace. With the growing importance of flexibility among the emerging workforce, unlimited PTO serves as a valid option when determining your PTO structure. However, it is important to know the more traditional options available.
- Traditional Accrual-Based PTO: Employees earn PTO incrementally based on hours worked or length of service.
- Lump-Sum PTO (Front-Loaded): Employees are given their full annual PTO allocation at the start of the year or employment period.
- Tiered PTO (Seniority-Based): Employees earn more PTO as their length of service increases.
- Flex PTO (Use-it-or-Lose-it): Employees must use PTO within a certain timeframe or lose it at the end of the year.
- PTO Buy/Sell Programs: Employees can purchase additional PTO days or sell unused PTO back to the employer.
Building a PTO Structure That Works
Creating an effective PTO (Paid Time Off) structure requires balancing employee needs with business operations. A clear, well-thought-out policy improves satisfaction, reduces burnout, and ensures productivity without disrupting day-to-day activities. Here are the key areas to focus on when designing your PTO system:
Streamline Management with Technology
Using PTO management tools and services like Procare HR makes tracking and approving PTO requests simple and efficient. These systems automate accrual, allow employees to view balances, and integrate with payroll and scheduling. Analytics tools also help employers identify trends, such as underutilized PTO or busy vacation periods, enabling better planning.
Hear how Procare HR drives HR success.
Decide How to Handle Unused PTO
Unused PTO can pile up, so it’s important to set clear policies. Options include:
- Rollover Policies: Let employees carry unused PTO into the next year.
- Use-it-or-Lose-it Policies: Require employees to use their PTO within the year.
- Cash-Out Options: Allow employees to exchange unused PTO for pay, either annually or at separation.
Each approach has benefits and challenges, but clarity is key to avoiding confusion.
Choose an Accrual Method
How employees earn PTO affects fairness and flexibility:
- Incremental Accrual: Employees earn PTO based on hours worked or years of service, common in hourly roles.
- Front-Loaded PTO: Employees receive their full PTO balance upfront, useful for salaried positions.
- Tiered Accrual: Long-term employees earn more PTO, encouraging loyalty.
Each method can be tailored to your company’s needs and workforce demographics.
Manage PTO Requests Effectively
To ensure business continuity, define peak periods when PTO may be restricted. Use fair systems for approving requests, such as first-come, first-served, or rotation. Cross-train employees to cover for team members who are out, minimizing disruptions.
Encourage PTO Usage
46% of employees don’t use their allotted PTO. Encouraging employees to use their PTO is just as important as offering it. Underused PTO can lead to burnout and decreased morale. Offering incentives, like small bonuses or extra days off for using all allocated PTO, can also help. Regularly remind employees of the mental health and productivity benefits of taking breaks.
Hear more ways Procare HR assists with labor management.
Align Policies with Your Company Culture
Your PTO policy should reflect your workplace values and adapt to diverse employee needs. For example, flexible options like floating holidays or additional PTO for remote workers can help maintain work-life balance. Transparent communication about how PTO works—including accrual, usage, and rollover rules—builds trust and prevents misunderstandings.
By simplifying management, encouraging usage, and ensuring fairness, your PTO structure can become a key tool for attracting and retaining talent while supporting a healthy, productive team.
Partnering with a PEO to Streamline PTO Rollout
When creating and managing a PTO structure, partnering with a Professional Employer Organization like Procare HR can make the process much more manageable. A PEO takes on the administrative burden of PTO management, offering tailored solutions to fit your business’s needs. They provide valuable expertise in setting up PTO policies that comply with legal regulations and industry standards, ensuring your business avoids costly mistakes or misunderstandings. Procare HR can also assist in rolling out your PTO plan by integrating it into your existing systems. From simplifying accruals and tracking balances to handling employee communications, a PEO ensures a smooth implementation. This reduces the risk of errors and helps with the consistent application of policies across all employees.
Additionally, PEOs offer reporting and analytics tools that can track PTO usage and trends, giving you insight into employee behavior and helping to adjust policies accordingly. By leveraging a PEO’s resources, you can enhance employee satisfaction with a more transparent, easily manageable PTO system—allowing your team to focus on other strategic priorities. By partnering with Procare HR, you can ensure your PTO offering is competitive, compliant, and easy to manage, ultimately unlocking more value for both your employees and your business. Contact us today to learn more.