As an employer, you want a team that’s motivated and productive at the workplace. Providing ample time off allows employees to stay refreshed and have a good work-life balance, thus performing their best at work.
As you begin to create a policy for paid time off, keep in mind that PTO is a piece of an employee’s compensation package. This makes it even more important to have a well-communicated policy in place. Not only is it important to your existing employees to have an easy-to-understand policy, but also to any potential candidates joining your company.
In this post, you’ll find a quick overview on the following:
Types of Time Off Policies
There are a variety of policies that can work for any one company, but no matter which policy is implemented it must be fair to the employees and the employer. Time-off policies tend to fall into one of three types:
Upfront policies: employees receive a fixed number of days at the beginning of a work year.
Accrual policies: employees earn a set amount of time on a daily/weekly/monthly basis.
Unlimited policies: employees aren’t given a fixed number of days to use, rather they can use as much time as they’d like.
On top of policy types, there are a couple of additional configurations for a time-off policy you’ll want to set. Two major pieces to think about are when a policy renews and carryover time. Policies are commonly renewed on the first of the year, an employee’s anniversary date, or a custom date, such as the company’s fiscal year. On this date, an employee’s balance will reset and any applicable carryover will be applied.
Carryover is the amount of time an employee is able to transfer over to a new year’s balance. For example, if a policy allows for up to five days of carryover and an employee has eight days left in their balance at the end of the year, they’d carryover a total of five days to the new year and would lose the remaining three days.
You’re probably now thinking, “what policy is best for my team?”
Here are some things to consider to help you make that decision:
Studies have shown that employees with a “use it or lose it” time off policy are more likely to use all of their given time. When policies leave room for ambiguity, such as when vacation days are unlimited and go untracked, employees tend to err on the side of appearing industrious. Thus, they may not take any time or little time off as possible.
A great place to start is by gathering your team’s feedback on a time-off policy. Have a conversation, check-in, or even send a survey to get a feel of what they value and see as fair in terms of paid time off.
Time Off Policy Categories
Now that you know the different types of policies, let’s talk about the different categories of time off you can track. For many years, the trend for providing time off was to give a “bank” of time the employee can use for personal, vacation, and sick leave. However in recent years, many states have passed laws regulating company sick leave policies. That being said, breaking out the different time off categories into their own policies is your best bet! Breaking out the categories will not only keep you compliant with your state’s laws, but you’ll also have a wealth of valuable data to review for trends and usage of the time used.
Ideas for time-off categories:
- Vacation/Holiday
- Personal
- Sick
- Maternity/Paternity
- Work Conferences/Events
- Work From Home
How Much Time to Provide
Once you’ve identified the different types and categories of time-off policies you’ll be implementing, you’ll need to determine how much time to actually give per category and as a whole. It’s up to each individual company to determine how many days off an employee receives, and how the time is given.
Not sure how much time to provide to employees? Here’s some info to help you get started:
Studies have shown that ¾ of small businesses give employees 10 days or less for vacation/holiday time, whereas Kin’s customer base averages to about 12 days per year.
It’s also very common to have different “levels” of time off for vacation/holiday policies, typically based on how long an employee’s been with the company. For example, employees at the company for 1 year get 10 days, 2-4 years get 15 days, 5+ years get 20 days, etc.
For sick leave, be sure to check out the laws for your state. It’ll likely outline how much time you must provide.
Creating a Clear Time Off Policy
Creating a policy that is clear and all employees understand is the goal. This will alleviate any questions/concerns the employee has and will also show your company is organized and professional.
So, where do you start? Answer these questions to get a time off policy started:
- Who’s eligible for time off?
- How much time off is provided?
- How does the time accumulate for employees?
- Can unused time be carried over to the next year?
- Is there a waiting period for new employees to request time off?
- How is time off requested?
If you do decide that an unlimited time off policy is best for your company, there are two things necessary for unlimited time off policies to work.
Tracking time used: You’ll still need to track each employees’ time taken so your team can know who will be off and when. Tracking also helps you understand how expensive the policy is to your company, and communicates to your team that you want to make sure they’re taking enough time off.
Trust: For this type of policy to be successful, your company culture must have trust baked into it. You’re trusting employees to use time off responsibly, and employees are trusting you that it’s okay and encouraged to take time off.
Once you have your policy created, add it to your company handbook and share it with the team. Include a message with information on why you’ve created/updated the policy, or better yet, have a pow-wow with the team to chat about it together.
Don’t have a company handbook? Well, now you have one started! In the meantime, share the new time off policy with the team so they know what to expect.
How to Manage Time Off Requests
Organization and communication are key to managing employee time off requests. Having a clear process on how requesting time off works at your company will tackle both.
You may think it’s simple and obvious, but outlining this process can help eliminate confusion for employees, and the easier it is, the more likely are they to request the time.
Let’s start with who will be responding to employee time off requests. Is it a direct manager, office manager, HR manager? Identify this person so the employee knows who to send their requests to.
Next, what happens once a request is approved? Having a team calendar showing when co-workers will be out of the office is very beneficial for small companies. This way everyone is aware and able to accommodate a teammate’s absence.
How Companies Can Encourage Employees to Take Time Off
A company’s leaders ultimately need to set the tone for the company’s time off policy. This includes ensuring everyone takes their allotted time off and fostering a culture that doesn’t make people feel hesitant to take their vacation days.
Let’s talk about three ways you can go about this:
1. Create a pro-vacation environment. Managers typically have a good feel on how their team is doing. If you notice an employee seeming worn out, encourage them to take some time off to reboot. Additionally, when an employee is taking time off they should be completely disconnected from from their job – not checking emails, taking calls, etc. You can’t reboot if you’re still plugged-in at work!
2. Company leaders should go public with their own time off. When leaders are public about taking time off and taking it in long stretches, employees can see that taking time won’t negatively affect how they’re viewed at the company.
3. Give employees a minimum. Companies with unlimited time off policies seem to have found success by mandating that employees take a minimum number of days.
How Kin Handles Time Off for Their Employees
Kin has been through several policy changes throughout our time, and we wanted to share our take on the unlimited versus set time off policy.
We used to have unlimited time off and did a pretty poor job of getting folks out of the office. We’ve since moved to a staggered (and generous) time-off policy that gives our team ample time to get out of the office, but also a means of understanding that it’s part of their compensation. That’s why it’s called paid time off, after all.
Moral of the story? Even if you give unlimited time off to your team, make sure you track how much folks are taking and, just as important, ensure there’s a good amount of communication about when folks are taking time off by using a team calendar. It keeps your team informed and fresh, and it paints a better financial picture of your company’s performance.
Still interested in learning more about PTO? Check out some of Kin’s other posts about it: