10 things to keep in mind while creating a PTO policy

Whether you are a small-sized company that is scaling up or a medium-sized business on its way to becoming an enterprise, your employees are your backbone. Paid time offs provide them the rest they need to refresh, the freedom to attend to their personal needs, and most importantly, a sense of ownership and self-discipline over their work-life balance. With paid time off, you display trust in your employees, treating them as responsible adults who can decide time off work for themselves without leaving a dent in their work delivery. They no longer have to explain to the managers (or lie to them!) why they need time off. To use PTOs to the fullest, a PTO policy becomes the go-to guide to let your employees know the number of allotted time off, the procedure for planning scheduled time off, accrual of time off, special time off such as bereavement leave, and so on. 

And that’s not all. 

A PTO policy offers countless benefits to managers as well. For business owners and managers, implementing paid time off in their organization without a guiding PTO policy is like driving a car without knowing the direction or the destination. You are bound to get lost. A PTO policy helps you enforce what you want to achieve with paid time off; reduce absenteeism, improve productivity, attract talent, and so on. It helps you strategize your goals based on the employees’ availability as they would know beforehand when an employee has planned time offs. Further, you don’t have the responsibility to provide permissions or ask for explanations since your employees are taking the time off allotted to them. Companies like Netflix have realized the benefits of having a clear time off policy that has helped their employees achieve a great work-life balance, and thereby, do great work. Considering the umpteen benefits of paid time off and implementing it effectively, a clear PTO policy is the best way ahead for your business.
Wondering how to get started with your PTO policy? We’ve got you covered.

Here are 10 things to keep in mind while creating a PTO policy

There’s no one-size-fits-all PTO policy. It depends on the size of the company, the company culture, and the working tenure of the employees. To get started, keep in mind the following:

  1. Allotted PTO days
    According to a 2016 survey by SHRM, the average length of PTO and vacation time depends on the length of service by the employee. Further, a survey conducted by WorldatWork provides an average range of 16-28 days of annual employee time off, largely depending on the service length. US Bureau of Labor Statistics states that companies provide an average of 10 days of paid vacation for one year of service. It is usually seen as a token of appreciation to existing employees and can help with retaining them and improving the turnover rates. Identify if you want to offer PTOs and vacation days based on service length and designation, or if you would prefer offering the same number of PTOs to all your employees, right from the first day at work.
  2. Check for legal obligations and compliance
    The United States does not mandate paid leaves, however, companies have to provide paid job-protected leaves under certain conditions mentioned in the FMLA. Check if the company has similar stipulations around paid time off and vacation days.
  3. PTO Eligibility
    Would the PTO be available to part-time and contract employees as well, or would it be restricted to full-time employees of the company?
  4. Will the PTOs be accrued or offered in lumpsum?
    Would you be offering the allotted PTOs in bulk at once annually, or would it be accrued at scheduled intervals over a year?
  5. Will the balance PTOs be carried over or would it be use-it-or-lose-it?
    Some companies prefer starting afresh every year with a new set of PTOs for the year. This can force employees to utilize all the PTOs towards the end of the year, causing a flurry of PTO requests. In order to find a middle ground, some companies let you convert PTOs as benefits, thereby helping employees with their monetary needs. Or set a cap on the number of PTOs that can be carried over to the next year. Analyze what can work best for you.
  6. Should PTO be made mandatory?
    Sometimes employees are not comfortable taking time off fearing that they will miss out on work, or worry if it would reflect poorly on their performance. 1 in 5 US employees feels guilty while taking time off, worried if it makes them seem less committed to work. In such cases, companies take it on themselves to make time off mandatory, to help employees take a break and come back to work refreshed. This will also prevent employees from hoarding their time off and aid in taking a break at the right time.
  7. Talk to your managers and train them
    Understand the ground realities of handling time off requests by talking to managers who have the responsibility of approving them. Take their concerns into consideration while devTeach them how to handle PTO requests and plan ahead for planned time off by the employees. In case you use time off management software, show them how to use it.
  8. Identify the needs of your employee
    Run a survey to understand the pulse of your employees- what do they seek, how do they feel about time off and how would they like it. It is not possible to accommodate the needs of every employee, but ensure that you tell them why you went ahead with your plan.
  9. Ensure that policy is clear, concise, and resonates with your company culture
    Your PTO policy is not a rule book for your employees. It is a handbook that abides by your company culture and values. Convey it with clarity, answer employee concerns if any, and ask them to spread the word. Use your PTO policy to attract employees, share stories of how your employees made use of the vacation time (with their permission, of course), and how it helps them come back, feeling refreshed.
  10. How to measure the effectiveness of your PTO policy
    Have clarity on the purpose of your PTO policy and why you need one. Identify the metrics that will tell you the effectiveness of your PTO policy, and ensure that a team checks and optimizes it frequently.


It is important to keep in mind that there’s no such thing as a perfect PTO policy. It is about creating a policy that works well for your company and its employees. It is not something to crack in a day’s time, but an ongoing optimizable process. The effects can be seen in terms of your employees’ performance, the turnover rate, the employee NPS, and your candidate sourcing efforts. Most importantly, a good PTO policy ensures happy employees who will be at their productive best. How has your PTO policy helped your company and how did you track its effectiveness? Let us know in the comments below.