Complete Paid Time Off Policy Example to attract Talent

It’s no secret that we are in a competitive job market these days and companies are finding unique ways to attract top talent. One of the biggest factors in employee total compensation is Paid Time Off (also known as PTO).

Why do you need a Paid Time Off (PTO) policy?

For start-up businesses, building out a PTO policy can be very confusing but it’s imperative a business has this policy documented to make expectations clear for both the employee and the business.

Here is an example policy that a business can customize to fit their employees’ needs: 

Purpose

[Company Name] recognizes that employees have diverse needs for time off from work and, as such, [Company Name] has established this paid time off (PTO) policy. The benefits of PTO are that it promotes a flexible approach to time off by combining vacation, sick and personal leave. Employees are accountable and responsible for managing their own PTO hours to allow for adequate reserves if there is a need to cover vacation, illness or disability, appointments, emergencies, or other situations that require time off from work.

Eligibility

PTO is accrued upon hire or transfer into a benefits-eligible position. Eligible employees must be scheduled to work at least 30 hours per week on a regular basis. Employees working less than 30 hours per week on a regular basis, on-call and temporary employees are not eligible to accrue PTO.

Procedures

Availability
PTO accruals are available for use in the pay period following completion of 90 days of employment. All hours thereafter are available for use in the pay period following the pay period in which they are accrued.

Accrual and Payment of PTO
Accruals are based upon paid hours up to 2,080 hours per year, excluding overtime. Employees working less than 40 hours per week and at least 20 hours per week will earn PTO hours on a prorated basis. Length of service determines the rate at which the employee will accrue PTO. PTO does not accrue on unpaid leaves of absence or PTO cash outs upon termination. Employees become eligible for the higher accrual rate on the first day of the pay period in which the employee’s anniversary date falls.

 Full-time accrual rates:

 *part-time accrual rates will be prorated

*Annual PTO accruals are based on an employee having 2,080 paid hours per year (40 hours per week).
**No PTO hours will accrue beyond the maximum accruals listed.

Use and Scheduling of PTO
Employees are required to use available PTO when taking time off from work. PTO may be taken in increments of as low as one hour.

Whenever possible, PTO must be scheduled in advance. PTO is subject to supervisory approval, department staffing needs and established departmental procedures. Unscheduled absences will be monitored. An employee will be counseled when the frequency of unscheduled absences adversely affects the operations of the department. The supervisor may request that the employee provide a statement from a health care provider concerning the justification for an unscheduled absence.

An employee is required to use PTO hours according to his or her regularly scheduled workday. For example, if an employee works a six-hour day, he or she would request six hours of PTO when taking that day off. PTO is paid at the employee’s straight time rate. PTO is not part of any overtime calculation.

Employees may not borrow against their PTO banks; therefore, no advance leave will be granted.

Payment upon Termination
In accordance with [name of state] law, after 90 of employment, an employee will be paid upon resignation, separation or retirement for all PTO hours accumulated but not used. Employees whose hours regularly drop below 30 hours per week will be paid PTO on the effective date of the change in hours.

Pick up our Prepare to Win: HR and Employee Buildout for StartUps Guide for our PTO recommendations.