Paid time off is also referred to as PTO. It certainly sounds great to think you could get paid while not having to be at work. So what is paid time off? PTO is usually a policy that many companies have in place that will allow their employees to be paid for things like vacation, illness, holidays, personal days and other days where the employee may not have to be present at work. Sometimes these days are accrued throughout the year or the employer has a set amount and may base the increased amount/days on seniority with the company.
The different types of paid time off
Depending on the company or organization, paid time off can calculated 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 then he or she would have approximately 52 hours in a year to use. Assuming this employee works the average 8 hour shift, then 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 if they use the “use it or lose it” rule. The use it or lose rule it 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 obviously just examples as many businesses practice different rules that is 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 really 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 specific 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 the way many of 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 the operations of a small businesses and their employees is “how do I create a paid time of policy?” Although it is important to note that all business are different, creating a paid time off policy can be a lot easier than you think.
Before anything, it is important 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 the status of an employee whether they are hourly, salary or union workers.
Also weigh out the pros and cons when offering PTO. Employees who have the option to 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 roll over 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.
PTO tracking tool
A way to have PTO automatically calculated for you is to sign up with OnTheClock. Once your 30 free online time clock account is setup you will then 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 does request 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 it was 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.
Now, doesn’t this sound a whole lot easier than doing it manually? If your answer is yes then I highly recommend that you sign up for your 30 day free trial and start saving your company money, time and give yourself the peace of mind that you well deserve.