Paid time off, planned time off, or personal time off (PTO), is a policy in some

employee handbook An employee handbook, sometimes also known as an employee manual, staff handbook, or company policy manual, is a book given to employees by an employer. The employee handbook can be used to bring together employment and job-related information wh ...

s that provides a bank of hours in which the employer pools sick days, vacation days, and personal days that allows employees to use as the need or desire arises. This policy pertains mainly to the United States, where there are no federal legal requirements for a minimum number of paid vacation days (see also the

list of statutory minimum employment leave by country In the majority of nations, including all industrialised nations except the United States, advances in employee relations have seen the introduction of statutory agreements for minimum employee leave from work—that is the amount of entitlemen ...

). Instead, U.S. companies determine the amount of paid time off that will be allotted to employees, while keeping in mind the payoff in recruiting and retaining employees. Generally, PTO hours cover everything from planned

vacation A vacation (American English) or holiday (British English) is either a leave of absence from a regular job or an instance of leisure travel away from home. People often take a vacation during specific holiday observances or for specific fes ...

s to sick days, and are becoming more prevalent in the field of

human resource management Humans (''Homo sapiens'') are the most abundant and widespread species of primate, characterized by bipedalism and exceptional cognitive skills due to a large and complex brain. This has enabled the development of advanced tools, culture ...

. Unlike more traditional leave plans, PTO plans don't distinguish employee absences from personal days, vacation days, or sick days. Upon employment, the company determines how many PTO hours will be allotted per year and a "rollover" policy. Some companies let PTO hours accumulate for only a year, and unused hours disappear at year-end.Lee Ann Obringer, HowStuffWorks Money
How Employee Compensation Works
p. 6. Some PTO plans may also accommodate unexpected or unforeseeable circumstances such as

jury duty Jury duty or jury service is service as a juror in a legal proceeding. Juror selection process The prosecutor and defense can dismiss potential jurors for various reasons, which can vary from one state to another, and they can have a specifi ...

military duty Military service is service by an individual or group in an army or other militia, air forces, and naval forces, whether as a chosen job (volunteer) or as a result of an involuntary draft (conscription). Some nations (e.g., Mexico) require ...

, and

bereavement Grief is the response to loss, particularly to the loss of someone or some living thing that has died, to which a bond or affection was formed. Although conventionally focused on the emotional response to loss, grief also has physical, cogniti ...

leave.Salary.com
Creating a Policy for Paid Time Off
/ref> PTO bank plans typically do not include short-term or long-term disability leave,

workers compensation Workers' compensation or workers' comp is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her emp ...

, family and medical leave,

sabbatical A sabbatical (from the Hebrew: (i.e., Sabbath); in Latin ; Greek: ) is a rest or break from work. The concept of the sabbatical is based on the Biblical practice of '' shmita'' (sabbatical year), which is related to agriculture. According ...

, or

community service Community service is unpaid work performed by a person or group of people for the benefit and betterment of their community without any form of compensation. Community service can be distinct from volunteering, since it is not always performe ...

leave.Andrea Lindemann and Kevin Miller, Clasp - Institute for Women's Policy Research
Paid Time Off: The Elements and Prevalence of Consolidated Leave Plans
May 2012. It is unclear as to when PTO bank-type plans were first being utilized in the workforce. In a 2010 study conducted by

WorldatWork WorldatWork is a global association for human resources management professionals and business leaders focused on attracting, motivating, and retaining employees. WorldatWork works to promote the role of human resources as a profession, offering t ...

, 44% of 387 companies surveyed said they started using PTO bank-type plans prior to year 2000.

History

An early instance of paid time off, in the late 19th century in

Australia Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. With an area of , Australia is the largest country by ...

, was by

Alfred Edments Alfred Edments (17 October 1853 – 13 July 1909) was a merchant and philanthropist in Australia. Early life and education Edments was born in London, the son of James Edments, a labourer, and his wife Ann, ''née'' Lyons. He had only a primary ed ...

who gave every employee a fortnight's holiday on full pay, and when ill, Edments continued to pay their salaries.

Workforce trends

A longitudinal study conducted by World at Work of over 1,000 organizations of different sizes concluded that over recent years, PTO plans have become more actively utilized by the general workforce. In 2002, about 71% of organizations were using traditional distinguished paid time off system, and about 28% were utilizing the PTO bank-type system. As of 2010, the use of the traditional paid time off system decreased to 54%, while the use of the PTO bank system increased to around 40% of all organizations. Recent information may indicate that PTO bank-type plans are difficult to implement in very large organizations. In 2010, only 32% of organizations with 20,000+ employees had a PTO bank-type system. However, 51% of organizations with 10,000-19,999 employees had PTO bank-type plans. In organizations with less than 100 employees, 48% had PTO bank-type plans. In the 2010 study performed by World at Work, industrial differences were also found. 97% of organizations in the

Education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty ...

industry use traditional paid time off plans with only 3% utilizing a PTO bank-type system. On the other hand, 80% of organizations in the Health-care and Social Assistance industry utilize PTO bank-type systems.WorldatWork
Paid Time Off - Programs and Practices
, May 2010. As of 2012, nearly one in five employees in the United States receive leave in the form of a PTO bank plan, but the contours of such policies are often little understood—especially outside of the human resources community. Among employees with paid leave, lower-wage employees are less likely to have access to a PTO bank than a traditional paid vacation system. 51% of employees in the lowest average wage quartile have access to any vacation time, and only 9 percent of the lowest wage employees have access to a PTO bank. 89% of employees in the highest wage quartile have access to vacation time and 28% have access to a PTO bank. There is also a difference in PTO among employment status. 9% of Part-time employees have access to a PTO bank, whereas about 23% of

full-time Full-time or Full Time may refer to: * Full-time job, employment in which a person works a minimum number of hours defined as such by their employer * Full-time mother, a woman whose work is running or managing her family's home * Full-time fa ...

employees do. 14% of

unionized A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ( ...

organizations have access to PTO bank-type plans.

Length of service

Paid time off usually increases with years of service to an organization. This provides a greater benefit for employees who have been with the organization longer. Source: Society for Human Resource Management, 2004 SHRM Benefits Survey. Additional Information: Paid Time off in the USA FactorialHR.com
Paid Time Off in the USA
/ref> ''Roughly twelve states, including Washington DC currently have legislation in place for regulating paid sick leave. Nevada and Maine, which both passed laws in 2019, have the only policies saying that state-mandated PTO can be used for things other than illness.''

Differences between jurisdictions

Because there are no federal requirements in the United States, the states must each determine respective regulations for paid time off in the state

labor law Labour laws (also known as labor laws or employment laws) are those that mediate the relationship between workers, employing entities, trade unions, and the government. Collective labour law relates to the tripartite relationship between employee ...

. Because of this, employers not only need to be aware, but also need to establish and follow a formal written policy for paid time off. Failing to formally establish paid time off policies may result in violating the state's code and the policy not being legally enforceable.

California

Vacation is legally vested per formal language in the California Labor Code. Vacation cannot be forfeited once earned, and unused balances must be paid out upon termination.

Pennsylvania

There is no Pennsylvania labor law which requires an employer to pay an employee not to work. Benefits like sick leave, vacation pay, and severance pay are payments to an employee not to be at work. Therefore, an employer only has to pay these benefits if the employer has a policy to pay such benefits or a contract with you to pay these benefits. An employer must follow its own rules for these kinds of payments. Most states, in fact, do not require unused vacation balances to be paid out upon termination, and very few states have formal rules protecting employees from changes in the vacation policy; however, all states must comply with federal labor laws such as the

Family Medical Leave Act The Family and Medical Leave Act of 1993 (FMLA) is a United States labor law requiring covered employers to provide employees with job-protected, unpaid leave for qualified medical and family reasons. The FMLA was a major part of President Bill C ...

New York City

In January 2014, 16 days after taking office, Mayor

Bill de Blasio Bill de Blasio (; born Warren Wilhelm Jr., May 8, 1961; later Warren de Blasio-Wilhelm) is an American politician who served as the 109th mayor of New York City from 2014 to 2021. A member of the Democratic Party, he held the office of New Y ...

put forward paid sick leave legislation to expand this right to more New Yorkers, including 200,000 of whom did not have any paid sick days. The law took effect on April 1 and applies to all workers at businesses with five or more employees, encompassing those excluded under the previous legislation that applied to businesses with 15 or more workers.

References

{{Employment Employee benefits Labor relations Leave of absence Employee compensation in the United States