What Is PTO?

A strong paid time off (PTO) policy helps retain current talent and attract prospective candidates. Not to mention that employers also provide PTO as a way to combat employee burnout, increase productivity, and boost morale. From what it is to how it works, read on to learn the basics of PTO.

What Is Paid Time Off (PTO)?

Paid time off, or PTO, is time that employees can take off work while still getting paid regular wages. This does not include times in which an employee works remotely or telecommuters. Often, PTO policies combine vacation, sick, and personal days. Companies structure their policies in different ways depending on the company’s size and industry—for example, sometimes vacation, sick, and personal hours are separated into different buckets, and other times they’re all pooled together. It’s also common for PTO policies to include time off for national holidays, floating holidays, paid family leave, and paid sick leave.

Are Employers Required to Offer PTO?

For most companies, there are no federally mandated PTO laws. However, there are exceptions. For government contract work and federally supported contract work that falls under the McNamara O'Hara Service Contract Act (SCA) or Davis-Bacon and Related Acts (DBRA), it may be mandatory to offer paid time off.

Each of these acts uses the prevailing local standard for fringe benefits to determine if PTO needs to be offered. So, if the prevailing local standard is to offer PTO, then PTO must be offered.

If an employer offers paid leave, it is important to note that it must be done in accordance with the standards of the Equal Employment Opportunity Commission (EEOC). This means that an organization’s PTO policy must not discriminate on the basis of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability, or genetic information. 

Employers, however, can segment PTO policies based on tenure, location, time commitment (i.e. part-time vs. full-time), and other factors.

Denying PTO Requests

Employers can deny PTO requests for vacation time and personal time, though there may be some limitations to other time-off requests. For example, if an employee requests time off that’s protected by the Family and Medical Leave Act (FMLA) or another labor law, they must grant the time off. With this said, the FMLA only requires unpaid leave. 

Similarly, an employer does have the right to ask why an employee wants time off; however, the employee is under no obligation to provide a reason. Employers should also be careful about the nature of the inquiry. For example, a line of questioning could infringe on an employee’s rights if it compels someone to reveal information protected by the Americans with Disabilities Act (ADA).

Common PTO Policies

1. Accrual: PTO accrues over time, typically on a monthly or quarterly basis. 
2. Lump Sum: A specific, predetermined amount of PTO is allotted to employees on a particular date (typically the beginning of the year or the anniversary of the employee’s start date).
3. Unlimited: Employees can use as much time off as they want and need, within reason. Some organizations permit the use of unlimited PTO immediately while others may implement a waiting period for new employees (i.e. three months after their start date).
   

State Laws for PTO Requirements

Some states may have PTO laws that apply to companies.

A few examples include:

1. Required PTO Payout: These laws make it mandatory to pay employees for accrued PTO days that have not been used. This means that employees who haven’t used their accumulated PTO can request compensation for PTO days that have not been taken.
2. PTO Payout Rate: These laws decide what pay rate should be used to calculate the total payout an employer is responsible for paying an employee. For instance, some states require employers to calculate payout based on the employee’s pay rate at the time of termination.
3. Paid Sick Leave: In a few states—including Arizona, California, and Massachusetts—employers are required to offer paid sick leave to qualifying employees. While all of these jurisdictions require some form of paid sick leave, sick laws may vary based on factors such as employee type, eligible employees, and rate of paid sick day accrual. Check if your city, county, and/or state requires paid sick leave. Be sure to look at your state, city, and county’s websites for specifications.
4. Paid Family Leave: Paid family leave is paid leave for employees needing to take care of family members for medical purposes, including for the birth or adoption of a child. Like paid sick leave laws, these laws can also vary depending on the jurisdiction. Variations may include employee type, employer size, employer classification (private, public, governmental), medical assistance type, and leave care recipient(s). Check to see if paid family leave applies to you.
   
   

PTO Blackout Periods

Vacation blackouts are specific dates when employees cannot schedule time off due to an expected increase in volume or special events such as product releases or the holidays. PTO blackout periods are common in industries with seasonal businesses such as retail and customer experience.

Since paid time off is offered at the employer's discretion, they have the right to designate periods during which PTO requests will not be approved, provided that such restrictions do not violate state or local laws or any union contracts.

Additional Resources

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