We’ve all been there. You post a new job posting on LinkedIn for an opening in your company. You schedule some interviews, but one candidate really stands out right away. Their interview is fantastic. Your supervisor gives you the go-ahead. You send over an offer letter. Everything seems to be going just fine, and then, you get that email. “Sorry, I’ve decided to move forward with another opportunity.” It makes no sense. What did these other guys offer that we didn’t?
This kind of frustration is all too familiar for those in the HR world. Here at Payday HCM, we’ve seen many companies battle with the guessing game that is hiring. Fortunately, there are a lot of tools within your control to attract top talent, such as a well-structured and attractive paid time-off policy.
In this article, we will discuss how to create a PTO (paid time off) policy that benefits not only your employees but also the company as a whole. We’ll look at the different options available regarding PTO and how to make the best decisions for your business.
In this article, you will learn:
What is the Importance of a Good PTO Policy?
Offering good benefits, including PTO, can be crucial for attracting and retaining top talent. Understanding the importance of a good PTO policy is the first step in being able to create a good PTO policy.
The Law of Attraction (and Retention)
Unfortunately, hiring is not as simple as thinking about top talent and, through that, top talent then finding you. According to the Pew Research Center, only about 49 percent of employees are satisfied with the benefits offered by their current employer. This means that 51 percent of employees aren’t satisfied with their current benefits (and might leave for a different company that has the benefits they are looking for).
Creating a solid PTO policy (and, in turn, a solid benefits package) might not only help attract some of the more talented individuals in that 51 percent but might help to keep some from your own 49 percent as well.
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Putting Your Employees First
Let’s face it: no one wants to be at work all the time. As much as you might enjoy your job, the weekend still serves as some much-needed time off that helps you rest and recharge for the next week.
Implementing a good PTO policy can help improve your employees’ work-life balance as well as their mental health. Both of these things can help to increase overall job satisfaction and, because of that, increase job retention.
Types of PTO Policies
When looking at building a new, more effective PTO policy, it’s important to consider all of your options. There are a few different methods for offering PTO within your organization. These include:
- Banked PTO
- Earned PTO
- Unlimited PTO
Banked PTO
A banked PTO policy provides employees with a fixed number of PTO hours for the year which employees may use at their leisure. In most cases, a banked PTO policy will combine things like sick leave, personal leave, vacation days, all under one umbrella of PTO (more on that later).
A PTO policy like this is relatively standard. Providing your employees with the freedom to decide when and how they will use their time off is a plus, but the amount of time off is limited.
Earned PTO
Earned PTO functions much in the same way as banked PTO in so far as both policies provide employees with a fixed number of PTO hours per year. The big difference is that, unliked banked PTO, where all of the PTO hours are provided to the employee up front, an earned PTO policy allows employees to earn their PTO hours through each paycheck (hence the name).
How much PTO is earned per check can vary, but amounts typically range from 2 to 4 hours depending on the level of employment, seniority, etc. Unlike banked PTO, however, that freedom for employees to utilize their PTO as they see fit.
Unlimited PTO
As the name suggests, unlimited PTO is, well just that: employees can take as many paid days off as they see fit. There are no limitations in terms of amount of hours and there is no distinguishment between holiday, sick, or any other kind of leave.
Unlimited PTO is still an up and coming perk: only about 4 percent of U.S. companies offer it, according to Forbes Advisor. That being said, it’s a perk that workers across all generations are interested in: 80 percent of Millennials, 70 percent of Gen Xers, and 63 percent of Baby Boomers are interested in unlimited PTO, according to MetLife.
You’ll want to be sure your company culture is in check before implementing a policy like this, though. A company that thrives on or encourages overworking can lead to underutilized PTO due to feelings of guilt or shame around taking more time off, according to BBC.
Best Practices When Creating a PTO Policy
Deciding on the right policy is only the first step to making your PTO policy truly standout. Here are some best practices to make your PTO policy the best it can be.
Prioritize Flexibility and Trust
Nobody likes to be told how to spend their time, especially when it comes to time off. Ensuring that your PTO policy prioritizes flexibility and trust—regardless of the type of PTO you decide to go with—is most important.
Combining the different types of leave to all fall under the banner of PTO will make it easier for employees to utilize their time off. It will also help to remove any insecurity around taking time off. Doing this and showing that you trust your employees will earn you trust and loyalty in return.
Create an Easy to Understand Policy That Fits Your Company’s Needs
A PTO policy is no good if people don’t use it. You’ll want to make sure that your policy is straightforward and clearly laid out. You don’t want to leave any questions about what type of leave is and isn’t permitted.
You’ll also want to ensure that the type of PTO you select will be the best fit for your company. None of these are one-size-fits-all solutions, so talking to your employees and seeing what would work best for them is what will work best for you.
Take Time Off from Worrying About Time Off
Creating any component of any benefits package, let alone PTO, can be stressful. Not only do you need to ensure it benefits the employees who currently work within your organization, you also need to ensure it’s attractive enough to those who are looking to potentially join your team. It’s a very fine balance, one that you hopefully now feel much more ready to find.
While a good PTO policy is certainly appealing, it isn’t the only way to attract and retain top talent. Learn more about what benefits employees look for most.
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