How Does A PTO Work?

How Does A PTO Work?

What Is PTO?

According to Freshworks, PTO, or paid time off, is a period of absence from work during which an employee is still compensated by their employer. Businesses may use the phrase PTO interchangeably with other terms such as vacation time, sick time, personal leave, or others to describe their policies surrounding an employee's paid time off while still receiving compensation from their employer. It is often referred to as annual leave or statutory leave. PTO is one of the most popular and highly regarded employee benefits. According to The Bureau of Labor and Statistics, in March 2022, more than 70% of employees had at least one form of paid time off. This article will explain how PTO works and some key questions about the topic.

How does a PTO work?


How does a PTO work

There are several methods for providing PTO. Offering paid time off to employees, which they can utilize as personal time, sick days, vacation days, or other sorts of employee leave, is the ultimate objective. Employers often adopt one of three PTO strategies: unlimited, allotment, or accrual. The most frequent components of PTO plans are national and floating holidays, paid vacation days, paid family leave, and paid sick leave.

PTO on an accrual basis

Employees earn vacation time as they work in this scenario rather than receiving a predetermined number of days at the start of the year. For instance, receiving 25 vacation days per year might earn 0.5 for each week you work; 25 days divided by 52 weeks equals 0.5 days. These accumulated days are kept on your employment record as a form of credit. If your manager gives the go-ahead, you can decide when to take them.

PTO on an allotment basis

Allotted days are a different way to get paid time off. Your employer will provide you with a fixed number of days in this situation each year. These allotted days usually expire at the end of the year, but if you have any unused days, your company may also allow you to carry over a specific number of days to the following year

Unlimited PTO

Unlimited PTO is a rising trend in workplaces today. It is a progressive method where you remove any hard restrictions and provide more flexibility and freedom about time off rather than restricting the number of paid days off granted to employees, provided that they complete their assigned tasks. The 2019 MetLife Employee Benefit Trends Survey polled Millennials, Gen Xers, and Baby Boomers and found that Unlimited paid time off is one of the most desired perks across generations. This was true for 80% of the Millennials, 70% of Gen Xers, and 63% of the Baby Boomers.

Types Of PTO

There are various types of PTO that employers may offer, some of which include:

Public holidays: Many companies are often closed on these days. Businesses frequently continue to pay their employees on those days as though they had worked.

Vacation: For qualified employees, several companies provide paid time off. The employee decides whether to take the time to rest or go somewhere. They usually have to seek PTO vacation days in advance and seek approval to take time off. 

Sick leave and medical leave: Sick leave occurs when an employee needs to take time off work due to a sickness, an injury, or to attend a doctor's appointment, and they may do so without losing pay. According to Zippia's 50+ Telling Paid Time Off (PTO) Statistics, over 54% of workers with paid time off have used sick leave to take a mental health day in the previous year but did not disclose the cause to their manager.

Related: 11 Reasons why employees fake medical leave

Parental leave is a PTO benefit that parents may use following the birth or adoption of their kid. Its goal is to give parents time to spend with their new child or baby without affecting their hourly or salary pay.

Bereavement: Businesses occasionally provide employees who have experienced a family member's or loved one's death with bereavement PTO. Instead of providing bereavement PTO, many businesses may expect employees to use personal PTO days.  

Personal days: For events or situations that are strictly personal and unrelated to holidays, vacations, illnesses, parenthood, death, etc., some employers give personal days as paid time off (PTO). Personal PTO day regulations can vary from company to company, but many employers need early notice.

Related: 13 Reasons Why Every Employer Need Paid Time Off

How does PTO work with salary?

Now that we have answered the question: How does a PTO work? , let us explore the topic more and understand how PTO works with salary. The amount of PTO salary employees receive varies by employer and industry. According to the Bureau of Labor Statistics, employees with one year of service typically receive 10 days of PTO annually. However, some provide more generous PTO plans, such as unlimited vacation or 20 or more annual PTO days.

How does PTO work for hourly employees?

For hourly workers, paid time off (PTO) often accumulates based on the number of hours worked, allowing for paid time off for vacation, illness, or personal needs. PTO often builds up based on how many hours a person works. For example, a person paid by the hour might receive one hour of PTO for every twenty hours worked. Depending on the employer's policies, you may collect PTO more quickly the longer you work there. To ensure that employees use their time off rather than accumulating it endlessly, there is typically a cap on the maximum PTO you can earn.

How does PTO work in California?

The provision of paid or unpaid vacation time to employees by an employer is not mandated by California law. However, suppose an employer does have a documented PTO policy or agreement to offer paid vacation. In that case, the employer is subject to some limitations on how they commit to do so. Vacation time is earned when labour is completed and is treated as pay under California law. California's paid time off policies are far more regulated than those in other jurisdictions to guarantee that workers are treated equitably.

Related: FMLA Leave in California

Does PTO include holidays?

PTO is an umbrella term encompassing all paid time off, including holidays. One of the common questions that employees have is How does a PTO work for holidays. The answer depends on the company's policy and the type of PTO plan they offer. Some companies have separate PTO and holiday policies, while others combine them into one pool of days that employees can use for any reason. PTO offers flexibility and permits employees to take time off for personal reasons like vacation, illness, or urgent family matters. Holidays are usually fixed and based on the calendar or the company's culture. If you are unsure about your PTO and holiday benefits, check with your human resources department or manager for clarification.


In this article, we explored the topic How does a PTO work as well as some questions surrounding PTO. Offering PTO is beneficial for both employees and employers. As such, employees and employers must understand how PTO works and how to use it wisely. Employees should respect the company's policies and procedures for requesting and granting PTO. Employers should set up clear, standardized policies and expectations regarding PTO use and monitor how it affects productivity and satisfaction among their workforce.

Chido Madzogo
This article was written by Chido a Consultant at Industrial Psychology Consultants (Pvt) Ltd

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