Is It Vacation or Paid Time Off?

July 12, 2016

Is It Vacation or Paid Time Off?

From the HR Pros of the HR Support Center

Traditionally, employers offered separate paid time off benefits to employees, such as paid vacation, sick leave and personal days. However, in the past decade, many companies have moved to a more flexible Paid Time Off or “PTO” benefit that incorporates all policies into one all-inclusive PTO plan.

The debate as to whether employers benefit from offering PTO verses separate vacation, sick and personal leave plans is constantly being researched. In an effort to assist employers in making an informed decision in this regard, below are some advantages and disadvantages of combining the company’s separate paid time off benefits into a single Paid Time Off (PTO) plan.

Advantages of a Paid Time Off (PTO) Policy

  • Employees are not incentivized to lie about being sick or having a doctor’s appointment in order to use all of their annual sick days, resulting in more transparency in the employee/employer relationship.
  • Research consistently illustrates that incorporating a PTO policy will result in employees taking more vacation time and less sick days. This benefits employers in two ways; first, employers typically receive more notice about scheduled vacations, affording more time to plan for adequate coverage. Second, most mental health professionals agree that employees return to work more refreshed and productive following vacation leave. The same results do not hold true for employees utilizing sick days.
  • Employees tend to value the flexibility that PTO provides.
  • Employers only have to track PTO hours, as opposed to separately tracking hours for vacation, sick and personal days.

Disadvantages of a Paid Time Off Policy

  • Employees are more likely to consume all of their PTO, whereas they may not have expended all of their sick or personal days in the past.
  • Employees tend to save all of their PTO time for vacations and come to work when they are sick, at times causing illness among other employees.
  • In some states, all earned PTO must be paid out upon separation of employment. Should the company have separate sick leave and vacation policies, state law often mandates that only unused, accrued vacation time be paid out upon separation of employment, sparing the employer from compensating the departing employee for his/her unused, accrued sick leave.

The HR Support Center’s Policy Library contains sample separate paid time off policies (such as vacation, sick and personal leave policies) and also a sample all-inclusive PTO policy.

Want more helpful answers to your HR questions? Subscribe to Paycor’s HR Support Center to access the Policy Library, as well as more HR resources and guides. Or, upgrade to HR On-Demand to get personalized answers and advice from an HR professional. Contact us to learn more.


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