How To Create A Paid Time Off Policy Your Team Can Enjoy

The Olympics only happen every four years, and your employees don’t want to miss it. A new study by The Harris Poll on behalf of the UKG Workforce Institute highlights the measures that 27.5 million employed Americans will take to catch the action without missing out on their pay:

• 8.5 million workers plan to come into work late or leave work early
• 7.6 million will call in sick when they’re not (this includes 11% of managers) 
• 4.7 million will skip work without giving any prior notice to their employer 
• 12.3 million plan to watch the sport for 1+ hours without their boss knowing

Each of these workarounds will cause disruption, loss of productivity, and disengagement at work. But companies can avoid them all by implementing a generous and creative paid time off policy. This guide discusses the benefits of a PTO policy, what it should include, and 10 examples of real-life policies for inspiration. 

What Is Paid Time Off (PTO)? 

Paid time off occurs when employers continue to pay their employees even though they’re not at work. Employees use this time, which is usually a few days or weeks, for various reasons, such as taking vacation, recovering from illness or injury, caring for a dependent, or attending personal appointments. 

To better understand the mechanics of paid time off in the real world, Nectar interviewed 1,000 full-time US employees to ask the following: 

What kind of paid time off (PTO) policy does your organization have?

• 71.3% of employees have a set number of PTO days or weeks 
• Only 6.5% have unlimited PTO
• 7.1% have unlimited PTO with a required minimum amount of leave  
• 15.1% have zero PTO policy at all 

Do you feel comfortable taking advantage of your company’s paid time off policy? 

• Yes = 74.9% 
• No = 25.1%

Why Do You Need A PTO Policy? 

As we’ve seen from the results above, 85% have a PTO policy of some sort. We would recommend the remaining 15% commit to this process for the following benefits for employees and employers: 

Encourage people to take their break 

A study conducted by the European Society of Cardiology found that vacation can prolong life. Between 1974 and 2004, participants in the study had a 37% greater chance of dying when they took less than three weeks of vacation compared to those who took more time. 

Yet, our research indicates that one in four people don’t feel comfortable taking time off work, which is bad news for companies trying to build a company culture with employee health and wellbeing at its center. Career expert Jasmine Escalera’s My Perfect Resume weighs in on the various aspects of company culture that can dissuade or prevent employees from taking their PTO. 

• High-pressure environments, often described as "fast-paced workplaces" put an emphasis on productivity over well-being and inadvertently discourage employees from taking breaks or PTO.
• Shifting or poorly defined company goals or objectives can leave employees in a constant state of playing catch-up, making it difficult to find the right time (or good time) to take PTO without impacting work or project timelines.
• Inadequate staffing across teams or departments can put an additional workload on individual employees, making them feel guilty taking PTO and putting more work on already stressed coworkers. 
• Lack of positive enforcement of PTO policies creates environments where taking time off seems wrong or is indirectly discouraged. 
• Glorification of "workhorse culture" where long hours or personal sacrifice are rewarded sets an expectation that taking less PTO or seeking more work-life balance goes against the company expectations.

A thoughtfully designed PTO policy aims to overcome these cultural issues. 

Combat burnout 

Employee burnout is prevalent throughout every type of organization. According to our research, 41% of employees currently experience burnout at work, impacting employee retention, turnover, and, ultimately, a workers’ quality of life. Of the people experiencing burnout, 

• 63% expect to look for a new job in the next three months
• 54% worry about their job security
• 61% wouldn’t stay at their current job if they didn’t need the money
• 64% get the “Sunday Scaries”

The solution? Harvard Business Review reports that an extended period off work is the answer—specifically, a sabbatical that distances you from your daily work can be transformative for dealing with burnout. 

Attract top-tier talent

Job-seekers assessing your employer brand will judge your organization by your total compensation package, including base pay, benefits, and PTO. Lensa Careers’ HR department explains, 

“It helps set the right expectations and can create an employer advantage by communicating paid time off as a total package: paid holidays, summer Fridays, sick time, vacation days, and FLEX time.” 

Remain compliant 

Documenting your PTO policy helps you avoid any legal issues or liabilities by creating a structured process for requesting and tracking time off and complying with relevant regulations. 

Lensa Careers’ HR department reminds us, 

“In the US, PTO can vary by state due to the laws and regulations by each locality. It's important to know the minimum expectations of your locality, but for companies that employ nationwide, they need to consider providing a PTO policy that is equitable to all employees without creating location discrimination among their workforce.” 

What Should You Include In Your Paid Time Off Policy? 

When employees take a leave of absence from work and are paid for the time they miss, they should clearly understand their rights and your expectations. Create a detailed PTO policy and distribute it using your: 

• Company handbook alongside other key policies 
• Onboarding documentation to keep new hires informed 
• Webinar or information sessions to educate employees and discuss any updates or changes 
• Internal communication tools to publish FAQs or answer specific queries 
• Employee newsletter to showcase team member vacations and travel experiences 

Your policy can be customized to reflect your approach to PTO as part of your unique company culture. Usually, it should touch on some of the following points: 

Overview And Purpose 

Start with a brief introduction outlining the purpose of your PTO policy and its benefits to employees and the organization. 

Example: "Our company values employee wellbeing and recognizes the importance of work-life balance. Our PTO policy is designed to provide you with a break from work so you can rest, recharge, and come back to work feeling refreshed and motivated." 

Eligibility For PTO 

Clearly define who is eligible for PTO, such as: 

• Full-time employees 
• Part-time employees 
• Temporary employees 
• Employees with a certain tenure 

PTO Method 

Paid time off is typically available to employees in one of two ways; it’s either accrued or frontloaded. 

• Accrued paid time off is the most common. This method requires employees to earn their time off in a given pay period before taking any leave. For example, new hires may need to work several months before they’ve accrued enough PTO days to take their leave. 
• Frontloaded time off is a flexible alternative. The company allocates all PTO hours to employees at the beginning of the holiday year, enabling them to book their leave whenever suits them best. 

PTO Requests 

Outline the procedure employees should follow to request and book their time off. Your workflow will likely depend on your employee headcount, how many people need to sign off, and the breadth of your HR team. A typical request could involve: 

• The employee must obtain verbal confirmation from the employee's manager or HR prior to submitting a formal request 
• The employee must submit a digital PTO form before a certain deadline (for example, at least X weeks before a vacation or X business days or hours before a personal day) 
• Managers and HR have X business days to approve or deny requests  
• Employees should log the PTO on a shared company calendar, enabling their team to arrange cover

PTO Tracking 

Part of the process should be informing employees how you plan to track paid time off, which sends a strong signal that this is a formal, equitable policy rather than an informal agreement. You might use: 

• A PTO spreadsheet, such as Excel or Google Sheets, to track requests, approvals, and current PTO balances 
• Your existing HRMS or human resource management system if it allows employees to view their balance and request time off through a web-based platform or app
• An integration with a third-party PTO software or vacation tracking app that offers additional features such as automated accruals, real-time balance tracking, and employee self-service tools

Types Of PTO 

Employers can or must offer paid time off for a variety of reasons, including: 

• Vacation days 
• Sick leave 
• Personal days 
• Mental health days 
• Public holidays 
• Cultural holidays 
• Compassionate or bereavement leave 
• Volunteering 
• Sabbaticals 
• Jury duty or court appearances 
• Family and Medical Leave Act 

Use your paid time off policy to describe how you differentiate these types of leave. 

Example: Company A offers all employees a blanket amount of PTO, which includes the following, as required: 

• 10 days vacation 
• 3 personal days 
• 5 sick days 
• 5 bereavement days 
• 2 cultural holidays

If employees need more sick days, they can’t eat into their vacation time, and vice versa. 

Company B takes a different approach, providing a PTO bank of 25 days that employees can use for any purpose. Workers don’t specify how they spend their time; they simply draw them down from their PTO pool as needed. 

PTO Usage 

Explain how employees can use their paid time off, providing details on: 

• What happens to any unused PTO—can employees roll over any days to the following PTO year or is it a “use it or lose it” situation? 
• Can employees borrow from the following PTO year? Imagine your PTO year runs from January 1st to December 31st. An employee wants to take a Christmas vacation, but they’ve run out of PTO days. Would you allow them to borrow leave from next year to cover the time? 
• Whether employees must use full-day or partial-day increments, such as 1 hour of paid time off to attend a medical appointment or deal with a family emergency 

Lensa’s HR department explains that people value flexibility with an employer, which is where offering FLEX time rather than just PTO can be a great perk: 

“FLEX can be conveyed as time employees can take at any time for any reason. For example, taking an hour each day for 8 days rather than just taking one day of PTO.”

Holidays And Office Closure Policies 

The PTO policy should specify how your company recognizes federal, public, or cultural holidays and what your organization's closure policies look like. 

Example: “We observe the following holidays [list] company-wide, during which all eligible employees are automatically granted paid time off. For any office closures outside of these designated holidays, such as due to inclement weather or special circumstances, affected employees will also receive paid time off corresponding to their scheduled hours.”

PTO Payment 

Explain how you calculate paid time off for each employee so there are no surprises when they receive their regular or departing pay packet. 

Example: If you’re using the accrual method, and you want to offer 15 days or 120 hours annual PTO to your employees, then each employee accrues 1.25 days per month of work, and their regular pay packet will remain the same. 

Example 2: If a departing employee's final monthly pay packet is $1,000 and they still have 2 days of PTO remaining, you would need to add 16 hours (2 days) to their final paycheck at their regular hourly rate ($1000/80 = $12.50 per hour = $200 PTO). 

PTO And Leaves Of Absence 

Explain how your PTO policy interacts with other types of leaves so employees can view a range of scenarios and understand the financial implications of their PTO choices. Answer some of the following questions: 

• Can your employees use their PTO balance to add longer to a bereavement leave? 
• Are they required to use their PTO to care for a dependent? 
• If an employee is already taking time off, according to FMLA,  do those days count against their PTO balance?
• Can employees use their PTO to supplement unpaid leaves, such as maternity or paternity leave? 
• Can an employee book PTO immediately following jury duty? 

Impact On Team Workloads 

When team members take time off work for any reason, it undoubtedly impacts their peers. Use this section of your paid time off policy to explain expectations around handing over ongoing tasks to team members without causing burnout. 

Example: “If you have a project deadline during your time off, it is your responsibility to complete the handover tasks before you leave. This will allow your team members to continue working without delays and without feeling overwhelmed by additional work. If anything urgent occurs in your absence, ensure your team members are fully equipped with all necessary information to handle the situation. When you return, please schedule a meeting with relevant colleagues to recap and discuss any updates or changes that occurred during your absence.” 

OOO Communication Expectations 

Being out of the office doesn’t always mean being totally disconnected from work. Some employees like Daniel Chelgren, Senior Video Content Creator at monday.com devise a system to stay connected and reduce the FOMO associated with leaving work behind: 

“Boundaries are everything! I've found that it helps me to set a dedicated 30-minute window to check on work messages while on vacation. Doing this 2-3 times while away gives me peace of mind, knowing I won't be totally out of the loop when I return while removing the urge to constantly check-in. If going 100% off the grid causes more stress than it's worth for you, I'd give this approach a try!” 

While this is a clear choice, many other employees can feel pressured to stay plugged in, with some attending team meetings or responding to Slack messages from their vacay. Companies requiring this communication aren’t giving their employees the time and space they need to recharge. For this reason, Jasmine Escalera recommends, 

“Communicate to employees what it means to disconnect during time off and make it clear there is no expectation to reply to work calls or emails unless there is a legitimate emergency.” 

Example: “Here at Company X, we want you to prioritize your time away so you feel refreshed when you return to work. There is no expectation from the company, your manager, or your team that you will be available during your PTO, and we recommend that you remove work-related apps from any personal device you carry with you. 

Before you go out-of-office, please set up your automatic reply email to inform everyone that you’re away and who they can contact instead. If your time off is unexpected (e.g., sick days), remove yourself from team calendars and Slack channels temporarily. However, if you’re on a long vacation, we recommend scheduling a short call with your manager for a quick recap when you return.”  

PTO Policy Abuse 

There may be times when your managers or HR team become aware of one or more employees who are abusing your paid time off policy. 

For example, you may notice employees who repeatedly don’t return from their paid vacation on time, citing travel disruptions, or who use sick days for personal reasons without a valid medical excuse. 

It’s important to handle these situations delicately and professionally, with open communication between all parties involved, to reveal the root of the problem. Clear directions about PTO policy abuse also equips everyone with a shared understanding of what is and isn’t accepted. 

Example: “We are committed to providing our employees with a harmonious work-life balance, and would always invite you to discuss any concerns you have about your PTO or vacation time. We value the trust between ourselves and our employees and strive for open communication at all times. Any employee found to be abusing our PTO policy will face disciplinary action, up to and including termination of employment. ” 

PTO Compliance 

Before you communicate your paid time off policy, always make sure it complies with relevant federal, state, and local labor laws, which you can list in your policy. Nectar recommends consulting with a legal and compliance professional to double-check you’re aware of the latest regulations and restrictions. 

10 Examples Of Real-Life PTO Policies 

While core PTO is essential for providing employees with rest and time away from work, some employers have constructed truly creative PTO policies that are great at attracting top-caliber talent. 

Minimum Time Off Policy 

Publishing a PTO number, or even offering unlimited PTO doesn’t mean your employees will take a break. If they feel busy, concerned about being laid off, or missing out on professional development opportunities, some employees will forego their leave entirely. 

Social media scheduling platform Buffer gets around this by requiring its employees to take a minimum amount of leave each year. The company’s Time Off page describes, “Over the years, we’ve evolved our approach to vacation and time off. We currently have a minimum 3-week vacation policy to encourage teammates to recharge away from work.” 

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Time Away

Streaming giant Netflix is famed for its work-life philosophy, and it strongly urges its employees to “take vacation.” The company encourages employees to tune into how they’re feeling and then take time off accordingly. 

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The Netflix Jobs page highlights, “Time away works differently at Netflix. We don’t have a prescribed 9-to-5 workday, so we don’t have prescribed time off policies for salaried employees, either. 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. Full-time hourly employees accrue 35 days annually for paid time off to be used for vacation, holidays, and sick paid time off. We believe in working smarter, not harder.”

Fridays Off 

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When that Friday feeling comes around, some employers operate dress-down days, or Summer Fridays. Others, like the World Wildlife Foundation give their employees the entire day off. 

Named after the organization’s mascot, WWF’s “Panda Fridays” provide employees with every other Friday off, which they believe is the key to a productive workforce. 

PTO Combination

Duke University is an example of an educational institution that recognizes its employees with a flexible approach to PTO, including an option to buy back any unused hours. 

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“DUHS provides staff time off for personal, family, community, and other outside needs and obligations through the "Paid Time Off" (PTO) plan, which combines vacation, holiday, bereavement, and sick leave into one program. DUHS staff accrue or earn time off based on years of service and whether they are in an hourly-paid or monthly-salaried position. Time away from work must be approved and recorded in a manner that protects the interests of both the institution and its staff.”

Holidays 

Technology company Intel celebrates 12 public holidays each year, but also offers its employees two floating days to take at their discretion. For example, employees could use these extra dates to take time off for cultural holidays that are meaningful to them. 

Unlimited PTO

Offering employees as much paid time off as they need is contentious. Employers offering this benefit likely have good intentions, caring more about the quality of work their employees do rather than tying them to a number of days in a spreadsheet. Yet, a Frontiers in Psychology study proves that UPTO has some problems—”early adopters reported that employees took less time off than previously, presumably leading to higher burnout rates.”

CharlieHR is an example of a SaaS company that has reversed its paid time off policy after three years, finding that unlimited leave didn’t deliver the results they were anticipating. Instead, they experienced: 

• A burden on teammates required to pick up the slack
• A gap between those who could afford to take plenty of vacations and those who couldn’t
• Employees felt anxiety about asking for more time off 
• Most employees weren’t taking enough holiday, hovering around 21 days in total 
• Difficulties communicating times or situations where they needed employees available to progress the business 

While unlimited paid time off didn’t work for this company, others like Grubhub use it as a key perk. The company’s Jobs page describes, “Grubhub offers unlimited vacation time for exempt employees and a generous time off policy for non-exempt employees.” 

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Digital Disconnect Days 

Travel payments platform Flywire encourages its employees, or Flymates to unplug from devices and spend more time on self-care and hobbies by offering each a digital disconnect day. The aim is to do anything non-digital that recharges you. 

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One FlyMate explains, “I take advantage of the Digital Disconnect Days because it is so important to get that opportunity to unplug, recharge the batteries, and come back fresh. And it's not going to happen unless you specifically carve out the time to do so. How great is it to have a weekday in order to do that?” 

Paid Sabbaticals 

Some employers reward years of loyalty by providing their long-serving employees with a sabbatical. Outdoor gear company REI offers a four-week, company-paid sabbatical for every employee that hits their 15-year service anniversary, and for every five years thereafter. 

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Paid Activism Hours 

Another outdoor company, Patagonia, is famous for its fantastic employee experience, including its PTO policy. Along with offering time off for paid wellness time, bereavement and parental leave, Patagonia also provides “paid activism hours for employees to engage with and give back to their communities in ways that are meaningful to them.”

#OptOutside 

Black Friday, traditionally the day following Thanksgiving in the US, is something of a retail phenomenon. While some shoppers use the day to hit their shopping apps hard or queue for holiday bargains, outdoor retailer REI has taken a stand against it. Since 2015, the company has closed its doors on Black Friday and paid all of its employees for the day off—not to shop but to take part in its OptOutside campaign that encourages everyone to get outdoors. Participants in the movement share photos and stories on social media that show their alternative to Black Friday. 

Download Our Paid Time Off Policy Template 

Ready to create a formal PTO policy for your company? Our paid time off policy sample is a great starting point. If you haven't already, start by designing your PTO strategy, then use the template to document the details that matter to your employees and your HR teams. 

Enhance Employee Engagement With Nectar 

Nectar’s employee-centric platform offers multiple ways to design a generous and creative PTO policy for your workers:

• Our Challenges feature incentivizes your employees to take time off by creating a custom challenge for vacations. Leaders can build a vacation picture challenge to encourage people to share their travels and inspire others to book a trip. Anyone who completes the challenge will receive Nectar points they can redeem for a range of rewards. 
• Our Rewards tool allows employers to set up custom rewards such as additional PTO days. Similarly, employees can use their points to get gift cards for companies like Airbnb, Celebrity Cruises, Delta Airlines, Expedia, Lyft, Uber, Southwest Airlines, and more to help them cover some of their PTO expenses. 

Ready to see our platform in action? Take a free Nectar demo today.