What is PTO? (Paid time off)

PTO or Paid time off leave is a work policy in which a business allows employees to take a certain number of leave without losing pay. This implies that employees will still earn remuneration even though they aren't present in their jobs for a particular time frame.

PTO can be granted for numerous reasons, such as marriage, grief, vacation, sickness or personal issues. Employees can take advantage of them based on their needs.

PTO is among the major benefits that employees can enjoy from a business. Flexible time-off policies are usually incentives put in place by big businesses seeking the best talent.

How to track PTO

You can get started tracking PTO with our PTO tracking spreadsheet. It is a free download and offers a variety of customization options.

Customisations include:

Download PTO template

Major types of Paid Time Off

To better understand what paid time off is, it is crucial to organise paid time offs according to the reasons given by your employee. This categorization will assist your employees in understanding which PTO is ideal for them while making it easy for you to stay abreast of which category records the highest PTO requests.

Below are some of the major types of PTO that you can offer to your employees:

Sick Leave

Sick leave assists employees in taking time away to recuperate from ailments or injuries. Under your business's PTO policy, you can designate a specific number of sick leaves every year.

For anyone that wishes to take a long sick leave, you can request that they attach their health records to the leave request form.

Vacation Leave

Vacation leave is ideal for employees who wish to take a work break. They can request a few days of paid time off to take a holiday, engage in leisure activities, go on vacation with family, etc. The main aim of seeking vacation leave is to ease off and recharge.

Because "Vacation leave" is subjective, you should ensure that your business policy clarifies when your employees are entitled to this category of paid time off, the specific time they must inform the management and how their work activities will be handled in their absence.

Personal Leave

Your employees can request this category of PTO to cater to short-term needs. This includes visits to the doctor or bank, car repairs, conferences, etc. They are all part of the Personal Leave category.

Optional Leave

Optional leave is given during specific days that are generally observed or regarded as public holidays which are not officially sanctioned by the company. Employees are free to take a leave during these days.

Generally, employees are permitted to select a set of days from a list. For instance, a business's PTO policy might authorise four optional leaves, which can be selected from a list of seven events.

Military Leave

In this category of PLO, an employee can request military leave if they need to participate in active duty or training. Military leave allows them to fulfil their civic obligation without losing remuneration.

Based on your country's laws, you may be required to add this to your business policy.

Parental Leave

Employees who recently become new parents can request parental leave. It is divided into two types: paternity and maternity leave. While paternity leave is generally allowed to be divided and can be requested according to the needs of the new father, maternity leave takes a longer time and is expected to be completed at once. Your employees can request parental leave even after adopting a child.

According to local law, many businesses limit how often employees can request parental leave.

Earned Leave

In this category of PTO, businesses earmark a few days for each budget year that employees can request leave after every other kind of leave has been utilised. If not used, the earned leave pay will be remitted at the end of the yearly salary or awarded as a bonus.

Sabbatical Leave

This is a paid leave available to employees while on sabbatical. This is common in academic settings. Sabbatical leave varies in duration. Some may last for as long as a year.

Benefits of Paid Time Off

Many potential employees look out for paid time offs when checking benefit packages. It is seen as a major attraction for companies aiming to hire world-class talent - an important deal breaker. However, PTO isn't just beneficial for your employees. It has numerous advantages for employers as well.

Prevents job burnout

Job burnout has huge consequences for businesses today. Apart from poor employee performance and a high absenteeism rate, they can reduce job satisfaction, even among your most productive employees.

Paid time off makes it easy for your employees to take some time off work without loss of remuneration. A relaxing vacation can keep them energised and revitalised, improving their job performance and outlook.

Rather than waiting until the Xmas holiday, your employees can ease off stress and become more efficient at work if they take paid leave every quarter or thereabout.

Improves diversity in the workplace

Hiring competent people, regardless of their background, who are good at their job is one of the priorities of every business. One way to achieve this is by creating an inclusive work culture. A strategic PTO policy can showcase your business's inclusivity to people irrespective of their belief system or ethnicity.

For instance, policies such as optional leave will allow minority employees to commemorate special holidays with their loved ones. This can be a competitive advantage to seek employment in your business rather than your competitor.

A boost in organisational awareness

With a leave management system, employees can inform their superiors and colleagues about their scheduled leaves. This assists managers in staying abreast of possible leaves and organise their work weeks in a judicious manner.

Furthermore, employees are conscious of contingency plans during an employee's absence. This way, work schedules, commitments and productivity will be less affected by this type of event.

Better workplace relationships

Having a paid time off policy for your business encourages your employees to be sincere and open about why they want a leave. This helps managers to better grasp the complexity or significance of the situation.

This mutual understanding leads to better relationships throughout the corporate structure. When employees trust management, they are honest about sharing business challenges and are less likely to express acrimonious opinions.

Competitive advantage

Most big businesses have a PTO policy for their employees. It is now seen as an important part of every workplace policy. Some companies even make it mandatory for employees to take paid leave.

In this regard, a flexible PTO policy can give your business that competitive edge in recruiting the best talent. If you and your competitors have equal bonuses and wages, a friendly PTO policy can tip the scale to your benefit.

Better Employee Retention

PTOs embrace workplace flexibility and demonstrate a powerful signal to employees that you are conscious of their needs. This fosters trust, which is the bedrock of sustainable employee engagement and relationships.

It gives employees a sense of belonging and makes them feel cared for. This can ultimately improve talent retention.

Improved Brand Value

Although your services and products have the strongest brand impact among your customers, it is important to prioritise improving your brand within your business.

Your brand must be regarded as trustworthy by your employees and job seekers. This means they should be pleased to continue working for you in the coming years. A paid time off policy can help improve your brand from within.

It discourages litigation and disputes, which can poorly affect your brand value. Most businesses on the "best companies to work for" list have a friendly PTO policy.

Enhance understanding of your employees

Using a quality leave management system, you can stay abreast of the PTO category with the highest number of leaves. This will allow you to figure out a trend concerning a particular type of PTO with the highest numbers.

For instance, if you notice an astronomical increase in PTO requests in the third week of February, you may wish to review the reason for that. This proactive approach can help you rectify a problem before it poses a threat.

PTO vs. vacation time: What’s the difference?

PTO is a standard type of leave that comprises all categories of paid time off (study leave, sabbatical leave, etc.). Vacation time is a paid leave, particularly for holiday or leisure purposes. Thus, vacation is a category of PTO, although PTO may be for other reasons besides vacation.

One way businesses can increase their employee retention rate is by providing flexible time off. This means employees can take leave without a label or reason. They may use the time off as they deem fit. Apart from vacation leave, employers may choose to provide other kinds of leave, which implies these leave are available to be used for specific purposes, which might be rigid.

PTO banks are becoming more popular. A study in 2017 shows that over 60% of employees will reject a job offer that does not contain paid time off. Thus, most people would consider working for companies with a flexible paid time off policy. The need for good PTO policies has been further underscored by pandemic-induced job reshuffling, as employees have realised the value of mental health in the workplace.


Here are some frequently asked questions about paid time off.

Is it unlawful to deny PTO?

Unless specifically stated in the employment contract, not paying PTO is not against the law. However, as explained in this article, PTO entitlement is highly beneficial. PTO vs. vacation: which is superior?

PTO is more flexible because employees are allowed to use it the way they like. Vacation time lacks this flexibility because employees must take their leave in compliance with the vacation policy.

Is PTO the same as sick days?

PTOs allow employees to take leave from work without loss of remuneration. Sick leave is a category of PTO available to employees when they are unwell or facing health problems.

Is PTO important?

Yes. PTO offers employees the option to take leave without fear of not being paid. PTO also allows businesses to stay updated on the absence of employees while promoting honesty, accountability and strong work relationships.

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