What Does PTO (Paid Time Off) Mean?

Paid Time Off (PTO) is a period of time, such as days or weeks, an employee is legally entitled to take off from work while still receiving pay from their employer. It is also known as statutory leave or annual leave.

An employee’s PTO starts building up as soon as they start working with a company that has a PTO policy in place. The employer typically has the final say on when they can take their PTO, and the employee is paid their standard wage or salary when compensated.

Today’s employees are burnt out. Specifically, 76% of them are, at least some of the time. Whether it’s because of their workload, their work environment, or personal circumstances, if your employees aren’t motivated, they’re simply not productive — and most likely, not happy.

Offering PTO is just one way to enhanceyour employees’ work-life balance, and it’s also one of the most desired. For 30% of employees, an increase in annual leave is an incentive to change jobs.

But providing employees with paid time off requires a clear, well-thought-out policy that includes guidelines based on the employee’s specific role (and protects the company).

That said, PTO is not simply a nice-to-have, but a legal requirement based on working times. Let’s dive a bit more into that…

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In the UK, most workers who work five-day workweeks are legally entitled to 28 days of paid holiday per year, or 5.6 weeks.

Part-time workers and employees who work irregular hours, such as shift workers or term-time workers, are also entitled to PTO for every hour they work.

In the UK, a company’s PTO policy will typically cover the many different types of paid leave and their guidelines around each. These can include are but are not limited to:

Maternity leave comprises the time taken off work before and after a parent gives birth. In the UK, there is a 52-week maximum for maternity leave, unless otherwise determined by an employer.

"Ordinary Maternity Leave” covers the first 26 weeks, while “Additional Maternity Leave” covers the second 26 weeks. The earliest that maternity leave can be taken is 11 weeks before the week of the due date, unless the baby is born early.

Employees who’ve given birth must take two weeks off after birth, or four weeks if they’re a factory worker.

For the first six weeks of their maternity leave, eligible employees will typically receive 90% of their average weekly earnings (before tax). For the remaining 33 weeks, they’ll receive 90% of their average weekly earnings, or £151.20 (whichever is lower).

This may differ depending on their employment type (part-time, full-time, etc.), as every employee may not qualify for statutory maternity pay.

Paternity leave is typically available for those whose partner has given birth or if they and their partner have adopted a child. In the UK, eligible partners are entitled to two weeks of statutory paternity leave.

Those two weeks can be taken consecutively or separately, but cannot start before the child’s day of birth, and must be finished within 56 days of their child’s birth.

Those on paternity leave typically receive a statutory paternity pay of £148.68 per week or 90% of their average weekly earnings, whichever is lower.

Paid sick leave, also known as statutory sick pay (Read More: our guide to statutory sick pay in the UK), covers employees who are ill for at least four consecutive days, including non-work days.

Employers start paying statutory sick pay from the fourth day onwards until the employee returns to work. Employees on paid sick leave can receive £94.25 for up to 28 weeks, which is paid to them on their standard payday, with taxes and National Insurance deducted as usual.

When an employee’s dependent or relative falls ill, employers often provide compassionate leave, or, following the death of a loved one, bereavement leave.

There’s no legal obligation for employers to offer paid or unpaid compassionate leave or bereavement leave, but it’s definitely encouraged for employers who want to support their employees when they need it most.

UK workers are, though, entitled to a period of unpaid time off due to:

• Illness, injury, or assault

• Disruption of care arrangements

• Their child being involved in an incident at school

Also known as statutory leave entitlement, UK employees are entitled to paid annual leave in the form of 28 days or 5.6 weeks of vacation, as mentioned above. Bank holidays may be included in statutory leave, depending on the employer.

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Unlimited paid time off policies are common for companies who want to attract top talent. It’s a steadily growing trend in the UK, with a 20% increase in jobs offering unlimited PTO between 2017 and 2018.

That said, offering unlimited paid time off can actually have adverse effects; employees can feel more anxiety about taking time off since there’s no set limit, and can actually end up taking fewer holidays.

This may sound great for productivity, but it can diminish employee morale and motivation very quickly, which will only decrease productivity in the long run.

To bypass those issues, some companies will implement a mandatory minimum number of days employees must take off, along with unlimited PTO. This provides employees with the guidelines they need and desire, while still providing the freedom to confidently request additional time off.

For employees, the major advantage of receiving paid time off is pretty cut and dry: Their work pays them, even when they’re not working. But really, it’s so much more than that — and their employers reap the benefits, too.

Now that we’ve covered the basics and importance of a PTO policy, let’s dive into how you can define your own:

Customising an employee’s PTO policy is often the best approach, as you can tailor it to their employment type (full-time, part-time, shift worker, etc.) as well as their seniority in the company. The PTO policy for each employee should answer the following questions:

• How much paid time off can the employee take per year?

• How many work hours per week is their PTO based on?

• How will additional hours/overtime worked by the employee impact their PTO?

• What are the company’s policies for maternity leave, paternity leave, sick leave, compassionate leave, and bereavement leave?

• Will you implement PTO rollover or a PTO bank? If so, how will it be calculated?

• Is there a limit to how much PTO can carry over to the next year?

• What is the minimum PTO required per year (1 hour, half a day, 1 day, etc.)?

• What is the company’s stance on emergency circumstances and paid (or unpaid) time off?

• Will they be compensated for their unused PTO if they get let go or laid off?

• How may their policy change in the future?

Your PTO policy should also cover the more practical elements of how, where, and when employees can request time off:

• How do employees submit their requests? (via email, HR software, calendar requests, etc.)

• Will their requests require manager/supervisor approval? If so, who is responsible for that approval?

• How far in advance do they need to submit their requests?

In a 2019 Vitality survey, 28% of employees didn’t take time off because they didn’t think their mental health concern was a valid reason, and 22% said the same about their physical health concern.

When employees don’t know what is deemed a “valid” reason for taking time off, they’ll typically avoid it, and their issues (or even resentment towards the company) will only grow.

Once you’ve established your company’s PTO policy, immediately add it into your employee onboarding and training documents so it becomes a seamless part of your process. (Psst: If you’re still doing this by hand, we have to tell you — there’s a better, easier way to manage your HR processes.)

Review the policy with the necessary team members so everyone delivers consistent information to employees when questions arise.

If the PTO policy is new, or newly updated, share it with employees — and be open to their feedback. Your policy may change over time as the company and employees’ needs change, adding on to what works and improving what doesn’t.

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