Understand what a PTO policy is, how it works, its different types, and explore a ready-to-use template to create your own employee time-off policy.
A PTO (Paid Time Off) policy is a company benefit that allows employees to take time off from work while still receiving their regular pay. It consolidates various types of leave—such as vacation, sick days, and personal leave—into a single framework. Companies implement PTO policies to support work-life balance, boost employee morale, and stay competitive in attracting talent.
PTO can be used for multiple reasons including:
Illness or medical emergencies
Vacations or holidays
Personal time
Family events
Legal or civic duties
PTO policies vary based on how companies choose to allocate and manage leave. Below are the three most common PTO structures:
1. Traditional PTO Policy
In this setup, employees are granted a specific number of days off annually. For example, an employee may receive two paid leave days per month, totaling 24 days per year. This is usually tracked monthly and may reset or accrue depending on company rules.
2. PTO Bank System
Instead of separating leave into categories (sick, vacation, etc.), this model merges all leave types into a single bank. Employees are free to use their paid days off as they see fit, with fewer restrictions on the reason.
3. Unlimited PTO Policy
Employees can take paid time off whenever they need, provided they meet their performance goals and have managerial approval. This approach is built on trust and flexibility, often used by startups and remote-first companies.
Here are the most common leave types typically included in PTO policies:
Sick Leave
Granted when employees are unwell or recovering from a health issue. Companies usually allot a fixed number of sick days per year.
Vacation Leave
Time off for rest, travel, or spending time with family. It is essential for employee well-being and reducing burnout.
Optional Leave
Optional or discretionary leave is not mandatory to take. If employees don’t use them, some companies allow leave encashment or carryover.
Parental Leave
Leave taken due to childbirth, adoption, or other parenting responsibilities. The duration and pay may depend on labor laws or company policy.
Earned Leave
These are leave days accrued over time as an employee works, often calculated based on years of service or hours worked.
Study Leave
Time off granted to employees pursuing higher education, certifications, or examinations, subject to prior approval.
Jury Duty Leave
Leave provided to employees required to attend legal proceedings or serve on a jury. It may be unpaid or paid based on jurisdiction.
Voting Leave
A short leave allowing employees to participate in local or national elections. Time off may vary by location.
Mental Health or Unplanned Leave
Some organizations allow a day off without prior notice to help employees recharge mentally. These are often informal but supported by progressive policies.
A commonly used PTO policy format may include:
10 days of vacation leave
8 days of sick leave
2 days of personal leave
Additional unpaid or special leave may be offered for bereavement, jury duty, or parental needs, depending on the company.
Policy Type: Traditional PTO System
Effective Date: [Insert Date]
Applies To: All eligible employees of [Company Name]
Leave Usage
Employees can start using their PTO after completing their probationary period.
Accrual and Rollover
Accrual Eligibility
A well-designed PTO policy provides clarity, consistency, and fairness across the organization. Whether your company adopts a traditional structure or an unlimited model, it’s important that employees clearly understand how to request time off, how PTO is calculated, and what happens to unused days.