What is Paid Time Off (PTO)

Paid time off explained

PTO is an abbreviation for paid time off. It certainly sounds great to think you can receive pay while not having to be at work. So what is paid time off? PTO is a policy that many companies have to allow their employees to use for vacations, illnesses, holidays, personal days, and other days where they may not be present at work. Sometimes these days are accrued throughout the year, or the employer has a set amount and may base its increased amount/days on seniority.

The Different Types of Paid Time Off

Depending on the company or organization, paid time off can calculate in a variety of different ways. Some companies may have a set amount of days in their employee handbook that allows you a specific amount of days per year. An example of this would be if an employee landing a job and the employer's policy was 10 days of PTO for the first year, 15 days the second, and 20 days the third year.

Some employees may have to accrue their PTO as they work throughout the year. For example, say an employee is full-time and works 40 hours per week. For every 40 hours worked, the employee may accrue 1 hour of paid time off. If the employee saved up all their paid time off during the year, they would have approximately 52 hours in a year to use. Assuming this employee works the average 8-hour shift, this would break down to 6.5 days of total PTO during the year.

Another thing to keep in mind is if an employer allows your paid time off to roll over to the next year or use the "use it or lose it" rule. The use "it or lose it "rule is pretty self-explanatory; the employee would lose whatever time they had to use towards vacations, sick days, holidays, personal days, etc., if they are not used by the end of the year. These are just examples as many businesses practice different rules that are laid out in their employee handbook. Also, note that sick, vacation, and personal days may be considered differently with some establishments and have their own entity.

Additionally, Paid time off is generally not included when calculating overtime.

How to Calculate PTO

As stated above, it does matter how each employer and company has their rules set up. Simple math can be used if a specific amount of time is accrued per a particular amount of hours worked. Also, you can always keep track of your paid time off by subtracting the days that you have taken off from your allotted days. We will use the example above. If you accrue 1 hour per every 40-hour workweek, the following math below would be used to calculate your total paid time off.

  • 1 hour x  52 weeks (1 hour per 40 hour week and 52 weeks in a year)
  • This would bring your total to 52 hours of PTO
  • To see how many days instead of hours for your PTO, simply take 52 and divide it by the amount of hours you work per day. Example: 52/8 = 6.5 days

Although this is how many people across the world may do it, there is a better solution. Imagine if an employer and employee can have PTO automatically calculated for them. An online time clock company, OnTheClock has designed this into their employee time tracking system, and it has helped thousands of employees and employers.

Creating a Paid Time Off Policy

A frequently asked question regarding small businesses and their employees' operations is, "how do I create a paid time off policy?" Although it is important to note that all companies are different, creating a paid time off policy can be a lot easier than you think.

Before anything, it is essential to know and understand the legal aspects on a federal and state level. Additionally, you may want to evaluate your paid time off policy based on an employee's status, whether they are hourly, salary, or union workers.

Also, weigh out the pros and cons when offering PTO. Employees who can take time off and receive payment for it tend to be happier and more appreciative than those who do not.

Below are 10 simple steps to follow when developing your PTO policy:

  • Learn the Legal Regulations for Your State.
  • Compare your PTO policy with your competitors.
  • Set aside special dates and types of coverage you want.
  • Meet with your accounting team.
  • Determine if you want team members to accrue and rollover PTO.
  • Decide how employees will be grandfathered into the policy.
  • Put the policy in writing.
  • Set up training sessions to introduce the system.
  • Onboard employees to new any technology or PTO management tools.
  • Review the effectiveness of your PTO over the course of the year.

Also, don't forget to translate your paid time off policy to layman's language so that every employee can easily understand all the terms and conditions. Alternatively, you can contract a professional writer or content editor to help you with policy writing.

PTO Tracking Tool

A way to have PTO automatically calculated for you is to sign up with OnTheClock. Once your online time clock account is created, you will have access to the luxury of having all of your employees paid time off calculated for you while accurately tracking time cards.

This feature allows all PTO information to be displayed on a single page for the employer to view. The employer is also able to approve paid time off when the employee requests it. When an employee requests to use a PTO day, alerts are sent to the employer to be approved or denied. If approved, time is allocated to time cards to reflect that time used.

Once you develop a PTO policy, here is a very brief rundown of the steps to follow with an OnTheClock account:

  • Choose protocol and rule that fits your specific type of PTO such as Vacation, Holiday, Sick and Personal.
  • Managers will have options to add PTO values such as per pay period, amount per hours worked, etc.
  • Admins will also have options to set max values to not exceed a specific amount.
  • Employers deny or approve employee’s paid time off requests.
  • Managers can see past activity for dates approved or denied.
  • Employees have the option to see how much paid time off is remaining in their bank.
  • The employees can also see if their paid time off requests are denied or approved.

Users will also have the option to carryover PTO when employees have paid time off hours remaining from the previous year.

Now, doesn't this sound a whole lot easier than doing it manually? If your answer is yes, I highly recommend that you sign up for your 30-day free trial and start saving your company money, time and giving yourself the peace of mind that you well deserve.

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a thought From ke park on 7/9/2021 ...
I am 20 hour employee for last 12 years and never had problem but now manager got changed. My work week is 4 hr very day Monday - Friday and I cannot work more hours (including holidays and PTO if it occurs in a week) They said if you have Holiday and PTO -example let say Monday. I still have to work to cover my 20 hours from Tuesday - Friday instead for remaining 16 hours. I am not worried about overtime etc. I just want to know am I required to work for full 20 hour over my holiday/Pto hours.
reply from OTC - Hello and thank you for reaching out. The answer to your question is more than likely one that has been set by your company's holiday and PTO policy. We recommend reaching out to your HR department to clarify your specific situation with PTO and holiday hours. We hope this helps.
a thought From Karissa on 6/17/2021 ...
I am an hourly full time employee. I took a pto day during a week I had worked 36 hours. My pto day should be 8 hours totaling my hours worked at 44 hours. I understand that I can not collect time and a half for the extra 4 hours but is it ok for my employer to cap my week at 40 hours and then I loose the 4 hours of the pto day? Or should I be paid those 4 hours at regular rate?
reply from OTC - Hi Karissa, each company's policy is different. By law, an employee is entitled to pay employees for only the hours in which they have worked. In your situation it may be worth asking your manager or HR department if they made an error and should have only deducted 4 hours from your PTO bank. It's important to note that many companies are on a budget to only pay employees for a set amount of weekly hours, and this may be the reasoning why they capped you at 40 hours with your PTO. We hope this information is helpful.
a thought From Sarah McDonald on 4/19/2021 ...
I am a 32 hour/week worker (hourly pay) and my boss asked me to propose a number of PTO days to cover holidays, sick leave and general PTO. I live in California and work in the legal sector. What would be an appropriate amount to ask for? I have asked a lot of friends but they work full time and have salaries, so I'm not sure how relevant their benefits would be to whatever number I propose. I don't receive any benefits from my job, just my hourly pay.
reply from OTC - Hi Sarah, thank you for reaching out. Although we cannot provide an exact amount of PTO days for you to request, we can inform you that there are typically 6 holidays that are paid by employers per year. Please refer to our US Business Holidays. We also recommend reading our California Overtime Law article that is filled with great details pertaining to California laws and regulations. We hope this is a great starting point for you.
a thought From Colton Walser on 2/18/2021 ...
I have a friend in Tennessee during this snow the boss is trying to make them take PTO and then still do mandatory classes and call people while at home. Is this legal
reply from OTC - Hi Colton, we are not legal professionals and cannot provide legal support. We do know that an employer must pay their employees for the time they work. This is standard practice for all businesses. Please reference this article: Do Employers Have to pay Employees if There is bad Weather We hope this helps.
a thought From John Dela Cryz on 8/16/2020 ...
I usually work 8.5 hours Monday thru Friday. I get paid overtime after 8 hours per day. Last week I took approved PTO Monday, Tuesday and Wednesday for a total of 24 hours. On Thursday and Friday I worked 8.5 hours each day. I submitted my time card for 24 hours PTO, 16 regular hours and 1 hour of overtime. My Manager told me that I have to adjust my PTO time off to 23 hours because the 1 hour of overtime counts is added to my total of 40 Hours for the week. Is this correct?
reply from OTC - Hi John, thanks for reaching out to our time clock blog. It is our understanding that PTO hours do not apply towards overtime since paid time off is not considered as employee hours worked. We recommend signing up with our time clock app to track your hours worked and PTO more accurately. If you are just tracking your time worked then our time tracking system is completely free to use. Download our mobile app for your convenience in The App Store and Google Play for free. This will provide you with a virtual time card to present to your employer if there is any future discrepancies. We hope this helps and have a great day.
a thought From jack o meeks on 5/2/2020 ...
I work by the job, commission, and I have accumulated 240 hrs of PTO within the 10 years I've been with the company. I'm not sure how this works but how am I supposed to use PTO to take some much needed time off without using vacation
reply from OTC - Hi Jack, thank you for the question. Company PTO policies can vary. You may have to submit a PTO request in a specified amount of days prior to taking the paid time off, or your employer may not ask for an advanced notice at all. Also, your employer may require a verbal or written request for your paid time off notice. Our time tracking system allows employees to electronically submit a PTO request to their employer and the employer has the option to approve or deny it. We recommend consulting with your HR department or manager for your company's policies. Have a great day, Jack.
a thought From Katrina on 3/16/2020 ...
If i am performing work tasks from home, not enough equating to an 8 hour day, but still performing work tasks, am I required to still submit pto for a 8 hour day (my company has a minimum of 8 hrs)
reply from OTC - Hello Katrina. Your work's PTO policy is set by your employer. This means that you must follow what they have in place. We hope this is helpful.
a thought From Ember on 1/13/2020 ...
When you get PTO, is it supposed to match your regular hourly rate? Because my shift was cancelled two weeks in a row for the holidays, I asked to use my PTO, and it was at a much lower rate than my hourly.
reply from OTC - Hi Ember. PTO hours are paid time off hours that an employee receives for their regular hourly rate/weekly rate when they are not actually working. We recommend that you contact your payroll/accounting department because an error could have been made.
a thought From Victoria Davis on 10/1/2019 ...
My company say they cant pay you pro if you have 40 hours or more a week. Is that possible?
reply from OTC - Hello Victoria, This would depend on many factor; whether or not you are an exempt or non-exempt employee, your state and city laws, and other factors. We recommend checking with your state labor department to be informed on what your employer is required to pay. We hope this information is helpful.
a thought From Bee on 9/17/2019 ...
When cashing out your pto at the end of the yr can your company only pay 50cents on the dollars for your PTO HRS. I AM SALARY.
reply from OTC - Hi Bee, Thank you for the question. Your PTO goes off what your company's PTO policy states. Sometimes it is better to use your actual PTO days instead of taking the payout at the end of the year. We hope this helps.
a thought From LaconyaMcelderry on 8/23/2019 ...
Is it Legal for an employer to take your PTO hours for a day you did not work plus give you an occurance?
reply from OTC - Hello, thanks for the question. We do hear of many employers using an employees PTO hours when he/she misses a day. We recommend asking these questions with your HR Department.
a thought From Dana Smith on 8/1/2019 ...
If our full time employee work week is 35 hours and an employee takes 9 hours PTO and works 29 hours, should they be paid the extra 3 hours? Or should the 3 hours be added back to their PTO and only use 6 PTO hours?
reply from OTC - Hi Dana, typically what we see in this type of situation is only the 6 hours being used to cap-off the week and the remaining 3 hours would stay in their PTO bank. We hope this helps.
a thought From Pj on 6/20/2019 ...
I’m a part time worker but my company has me working as a full time worker. Aren’t I suppose to accrue some pto?
reply from OTC - Hi PJ, you probably should check with your local state laws and, but usually when an employee works overtime, he/she is entitled to overtime pay. Again, we recommend reaching out to your state's department of labor to clarify.
a thought From Tim McLeer on 3/10/2019 ...
I am a full time employee ---work 40 hours per week. Due to time worked over 5 years I am supposed to receive 3 weeks of vacation this year, 120 sick time hours and 40 hours personal time On my accrued PTO sheet it says 76 hours- 0 hours for vacation, 0 hours for sick time and 0 hours for personal time. Today is March 8-2019. This is the first year our company is using the PTO system. How can I receive 3 weeks of vacation , 120 for sick time and 40 hours for personal time using the PTO system. Something is fishy if you ask me.
reply from OTC - Hi Tim, We recommend that you bring this up with your HR department or Manager. If your company is using our services then please have them reach out to us to help properly set up the PTO settings. We hope this helps.
a thought From Greg on 11/19/2018 ...
I average 21 hours per week. The "company" , (do not know if I can name it here but no employee, say one, gets more than 29.5 hours per week for the "company" will have to pay benefits if an employee gets 30 or more per week), how do I calculate PTO?
reply from OTC - Hi Greg, so in most states PTO(paid time off) is simply a gift from the employee to the employee, although some states do mandate sit time off. PTO is generally not based on how many hours you work in a week, it really depends on the employer employee/agreement. So our stance on your questions would be to look to your agreement or contract with your employer, there you should find what you are looking for. If not, please reach back out to us, we would love to help more.
a thought From Jo Robins on 9/27/2018 ...
Hello I am a full time(40 hours) employee here is a set schedule for the week. The start of the week is Saturday and the end of the week is Friday. I asked for the Friday off as PTO and now I am only scheduled for Sunday off. I would like to know if they can schedule me my day off as PTO? Can they do that? Sat 8 hrs Sun off Mon 8 hrs Tue 8 hrs Wed 8 hrs Thurs 8 hrs Fri PTO Can my manager schedule me my only two days off that week is the PTO and sun
reply from OTC - Hi Jo, Generally paid time off is requested by the employee for a certain number of hours and days. The employer then approves or denies the PTO. If approved the hours are added to time cards and you get paid. Is it possible your employer made a mistake on the day off you requested? We would suggest having a conversation with them to clear things up. Back to your question if they can do that, from what we can see there are no laws directly governing how an employer handles PTO, it generally falls back on the PTO policy. Employers are not required to give paid time off according to the FSLA. PTO is either a gift from your company or a negotiated piece during the hiring process.
a thought From Monica on 8/28/2018 ...
If I schedule to use 8 hrs of PTO therefore working 32 hours this week. However i work 3 hours more than my 32 hours for a total of 35 hours are those 3 hours paid as overtime? Or do i only use 5 hrs of PTO?
reply from OTC - Hi Monica, It depends on your Overtime rule. Generally PTO hours are not included in the overtime calculations, here is an article which may help explain - PTO And Overtime
a thought From Rosetta L Mebane on 6/15/2018 ...
is it legal for your employer to use your PTO time to adjust your time sheets if the employee didn't request to use their pto
reply from OTC - HI Rosetta, Unfortunately, we cannot answer this question. I would suggest contacting a lawyer.

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