What’s PTO? How to set your small business up with a policy for paid time off

By Fingercheck Marketing
August 1, 2023

According to a Harvard benefits survey, a flexible and generous vacation time policy is one of the most appreciated and desired benefits available today. Such a policy translates to employee satisfaction and retention, as well as being a strong recruiting tool.

Does your business have a vacation policy or do you allow for Paid Time Off (PTO)? Both are viable options.

PTO allows employees to get paid while they’re away from work, but their time off might be vacation time or simply flex time. It’s important that you create a policy for time off and that you track your employees’ accruals. With Fingercheck Time Tracking, you can set up accruals and you can easily roll out your PTO policy. You can sign up today and get started right away.

Fingercheck can help you set up your PTO policy, but it helps to know the answers to these questions: What is a PTO policy? Should it be a PTO policy or a vacation policy? How do you track PTO?  

What is a PTO policy?

A PTO policy defines the rules regarding the employees’ paid vacation, personal time and sick days in a calendar year. There is no federal law that requires businesses to offer PTO, but most businesses offer time off to help their employees achieve a better work-life balance.

An employee can use PTO for several types of absences including vacation, sickness, personal time or bereavement. Some businesses might offer a total lump sum of time that employees can use when they need a vacation or when they’re sick. Others offer specific amounts of PTO for each category.

PTO vs vacation

PTO is broader than vacation and covers any paid time away from work that an employee chooses to take. Vacation refers specifically to the type of break that an employee can use for relaxation.

Another way to look at it is that all vacation time is PTO, but not all PTO is considered vacation time.

How do you track PTO?

Fingercheck automates the process through a combination of accrual and absence policies. Time Tracking automatically monitors the amount of time that employees have available to use toward specific types of time off.

PTO is available with our Time & Attendance, 360 and 360 Plus pricing plans. Compare the options and sign up here.

Best practices to establish a PTO policy

As you establish your PTO policy, it is important to consider how you want to frame it. Some employers continue to separate time-off categories between vacation, sick and personal time, but increasingly employers are implementing general PTO banks that employees can draw from for sick days, vacation and/or other personal needs. 

Also think about rules you want to establish for the end of the year. Specifically, will you allow paid time off to roll over to the next year, or will you institute a use-it-or-lose-it policy?

We have a few tips to make adding a PTO policy easier. 

Tip 1 Managerial Approval: To successfully manage employee coverage, there should be a system to notify the managers of PTO. This helps the manager figure out who would have to cover for an employee when they use PTO. Fingercheck Scheduling can help you with shift creation, too.

Tip 2 Clarity: Employees should know what the PTO policy means for them. A transparent system can show what’s expected of the employees when they want to use PTO.

Tip 3 Notification Time: It simply means that you need to set a deadline for employees to call in sick. This is particularly useful for retailers, hotels and restaurants.

Tip 4 Customization: Some businesses offer PTO only to their full-time employees. Or they might offer full-time employees more PTO than what they offer their part-timers.

Tip 5 Volume: An important aspect of your PTO policy is the total time off that you give your employees. Keep in mind that the more PTO you offer, the more attractive your business will be to potential employees.

Tip 6 Accrual: You need to decide whether you’ll provide PTO in one lump sum at the start of the year or if employees will have to accrue it. With accrual, employees get PTO based on how much they work.

Tip 7 Rollover or Not: You may select a use-it-or-lose-it PTO policy, which means that employees have to use all their PTO each year. Or you can go for a rollover policy where unused PTO can be added to the next year’s total of paid time off.

Tip 8 Automation: Manually allocating and tracking PTO can be a challenge for small businesses. But with Fingercheck, you can automate the process.

By setting up an accrual policy, you’ll know the hours of ‘’absence credit’’ an employee has accrued. Once you create an absence policy and link it to your accrual policy, you will have automated your PTO policy. That means, now you’ll have more time to focus on the important aspects of your business.

How Fingercheck helps

Fingercheck allows for multiple levels of accrual so that if you do choose to allow certain employees to accrue time off at a faster rate (such as an executive versus a newly hired employee), you can program the system to do so. 

Additionally, employees can request PTO using the software, which supervisors can approve using the mobile app or the web-based application. You can even set all paid holidays on autopilot so that the system knows when and how to allocate holiday time to your staff.

However you decide to craft your policy, Fingercheck makes tracking PTO and managing employees’ vacation time a breeze.

Are you ready to get started? Let us make your PTO easy. 

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