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December, 2020

PTO vs Vacation and Sick Time, Explained

The differences in paid time off (PTO), vacation time, and sick time are hard to decipher, as they rely on a mixture of company policy, state law, and federal regulations. Many HR professionals and companies are changing how they classify paid time off for employees, especially recently, and it’s become extremely important for anyone who works in HR to understand the difference between PTO vs. vacation and sick time. PTO has evolved from an all-inclusive term for sick and vacation time into a dynamic aspect of HR management.

In this article, we will explain PTO vs. sick time and vacation time and how they’re different. We’ll also talk about why it’s essential to your employees’ health. Finally, we’ll give examples of how HR technology can help implement time-off protocols in your organization.

What is PTO (Paid Time Off)?

Paid time off (PTO) refers to when an employee takes off from work and receives compensation. This paid time off can include vacations, personal days, or illness. There are many ways in which employers can allocate PTO, including:

Time Off Tracking Reporting

Unlimited PTO

This is when a company allows employees to take free time when needed as long as it does not interfere with their ability to complete their work.

APS Icon Sheet_Overtime

Accrued PTO

This is when employees can accumulate or earn days off over time. For example, an employee earns two PTO hours for every 40 hours worked. PTO accrual plans can vary from company to company.
Reload

PTO Bank

A company gives its employees a set amount of PTO hours, which reset annually. Some employers reset PTO hours by hire date; others reset them on January 1.

It’s important to remember that it is up to the company to decide if and how PTO is allotted based on its needs and state and local regulations. How a company chooses to calculate PTO can depend on various factors, including industry and employee classification.

What gets challenging is how an employer decides to qualify PTO, vacation time, or sick time for employees. Here are the differences in PTO vs. traditional vacation and sick time. Understanding these differences will help employers choose which combination of options work for them:

PTO Vs. Vacation Time

The difference between paid time off and vacation time is complicated. It all depends on how the employer decides to view vacation vs. paid time off. Vacation time usually is considered as time an employee takes away from work for rest. Whereas, PTO could include time off an employee takes for jury duty, personal days, or doctor’s visits.

How time is accrued for vacation days vs. PTO can also differ. Companies can deposit days throughout the year based on pay periods for accrued vacation vs. PTO. These hours can be credited annually based on either an employee’s hire date or at the beginning of the year.

Still unclear about vacation time vs. PTO? Think of the difference between PTO vs. vacation time like this. Daniel B. Chammas explained the difference between vacation time and PTO best in a webinar hosted by BLR:

PTO is broader than vacation. Vacation is a subset, or an example of PTO. Vacation is PTO, but PTO may not necessarily be vacation.

In other words, vacation time falls under the PTO umbrella, and its intention is for an employee to relax and reset away from the office. However, the employer can set individual specifications as to what the difference between PTO and vacation is.

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PTO Vs. Sick Time

Now we’ll talk about sick leave vs. PTO. Just like vacation time, sick time is also under the PTO umbrella, as sick days are considered PTO in some circumstances. So, what is the difference between PTO vs. sick days? Sick time is when an employee stays at home if they’re ill or takes care of an ill family member. The idea is to protect others in the workplace by allowing sick employees to stay at home, but this isn’t what always happens.

Traditionally, employers may have required employees to provide a doctor’s note as proof of an illness, or employees may have “called in sick” to have a day to themselves, which is why including sick leave into PTO is attractive to many companies. PTO, vs vacation and sick time, eliminates the need for employees to be untruthful or for employers to ask intrusive questions.

However, if companies include sick time in a PTO policy, many employees will opt to work ill and not use up a precious day off. In fact, 84% of respondents with PTO in this Tsheets survey admitted to going into work while sick, and 33% say it’s because their employer creates a culture of going to work while ill. The perception is why it’s vital to understand the differences between PTO vs. paid sick leave.

How PTO Can Affect The Bottom Line

According to a SHRM study, 35 percent of Americans are not planning on taking all their vacation days. Why? The top 2 reasons were:

  1. They are saving their PTO days for something better.
  2. They have too much work that they don’t feel they can take time off.

If employees are staying at work, though, doesn’t that mean a healthier bottom line? No, businesses suffer if employees don’t take time off to recharge. Americans forfeited 236 million PTO days, costing employers $65.5 billion in lost benefits. Employees also feel the cost of not taking their paid days off, as they essentially “donated” an average of $571 back to their employers in additional hours worked.

Taking time off provides more than just monetary gain. Employees who use their paid time off tend to be happier overall and are less at risk for job burnout. Furthermore, companies who offer PTO vs vacation and sick time as a program are more competitive in labor and talent markets when hiring. Having talented, healthy employees can help create an overall better community within an organization. This balance results in more productive, satisfied employees and generates a workplace culture where people want to work.

Standard Holiday PTO and Vacation Time Protocols

Managing employees’ time off during the holidays can be challenging. While employers don’t want to be insensitive to employees’ needs, there are particular circumstances in which all hands need to be on deck. In addition to time off policies, companies must also consider how to lawfully compensate employees for the hours they work during a holiday.

Having the right technology can help streamline time off requests, ensure accurate holiday pay, and help manage expenses during a hectic time. These tools can also make it easier to manage paid time off vs. vacation time. Here’s how payroll and HR technology can help your PTO process:

Need Help Managing Holiday Time Off?

Read our blog to learn more about calculating holiday pay for your employees.

Pre-loading Holidays

Holiday preloading is a feature many payroll and HR platforms offer to help employers schedule holiday pay in advance based on predetermined conditions such as employee types, pay groups, and wage types. Using this feature helps ensure that employees who work during holiday hours are accurately compensated for hours worked.

Managers often choose to use holiday preloading, so the right employees work the proper amount of hours. They also find that holiday preloading eliminates the need for manual holiday pay calculations, which helps relieve stress from year-end processing and scheduling. Overall, employers can be proactive about holiday scheduling and have better control over their labor expenses. Furthermore, preloading holidays make it easier to manage PTO vs. vacation days.

Floating Holidays

Floating holidays are a form of paid time off an employee can use at their discretion by acting as a substitute for a public holiday that may not fall on the same date every year. An SHRM report found that 30% of employers offer paid floating holidays, and more companies are offering these days instead of personal days and federal holidays. Floating holidays typically do not roll over from year-to-year and are not paid out during the end of the year.

Businesses are not required by federal law to offer floating holidays. However, Title VII of the Civil Rights Act of 1964 requires employers to provide reasonable accommodation for their employees’ religious observations. Hence, companies opt to offer floating holidays to comply with this requirement.

Employers may also choose to give employees a floating holiday to be more inclusive or as an additional benefit. Company policies may also dictate how to use a floating holiday and specify any PTO policy restrictions. A clearly defined PTO policy will ensure PTO days vs. vacation days are used correctly.

Blackout Dates

Prohibited dates, also known as blackout dates, restrict employees from taking time off during specific periods. Employers can set blackout dates to prevent under-staffing during a high-demand time.

Having an HR and payroll platform that allowed for blackout dates can help employers streamline their time-off request processes. Employees will receive a notification if their requested time off is during a blackout period, allowing employers to simplify the time-off request process.

Things to Consider if You’re Looking to Switch to PTO

Knowing the differences between vacation time and paid sick leave vs. PTO and building the organization’s culture around actually taking their time off will boost your bottom line and create a workplace where people want to work. With 33% of employees admitting their employer perpetuates a culture of going to work sick, businesses need to create an environment where employees know they can use their paid time off to keep everyone safe, happy, and healthy. Companies can take care of their workforces and keep employees safe by implementing PTO policies that have defined distinctions between PTO vs. vacation and sick leave.

Having the right payroll and HR tools can streamline the time-off process for employers. At the same time, ensuring employees are being accurately compensated for their time away from the office. Also, employees who feel supported taking time off are more likely to reset and recharge.

In a world where more and more employees are working remotely, managing PTO from anywhere is vital to adapt to the future of work. Do you have the PTO protocols and tools in place today to adapt in 2021, or is your company in danger of falling behind? If so, then it’s time to make a change for the better.

About APS

APS has a mission: to make payroll and HR easier. Through our self-service features, employees can request time off, check accrual balances, review approved time off, and view their time card by pay period. APS’ all-in-one solution provides visibility so managers can view and approve time-off requests, create schedules, and control labor costs. The APS Mobile App makes scheduling even more effortless by giving both managers and employees the freedom to access time information from anytime, anywhere.

Businesses choose APS as their workforce partner because of our focus on the customer experience. As a result, we continually maintain 98% customer retention and satisfaction rates. For more information on APS and how we can help make payroll and HR easier for your business, call us at 855.945.7921.

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