Paid Time Off (PTO): What Is It and How Does It Work

By Chris Kolmar - Nov. 4, 2020

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Before joining a company, there are many steps and procedures you will need to follow during the negotiation period.

This is the time when you will need to sit down and discuss what your salary will be and what your benefits will be. There are several typical benefits to expect when joining a company. These can range from health insurance, obtaining a 401K, and even getting paid time off.

Over the past several years, more and more companies have been leaning towards offering their employees paid time off. Paid time off is when an employer grants an employee a certain amount of hours and even days off without docking it from their paycheck.

Here you will learn more about what is paid time off, its regulations, and how it has been updated throughout the years.

What is Paid Time Off ( PTO)?

More commonly known by its acronym, PTO, or paid time off is when an employer provides an employee compensation for their work. Many employees use PTO for vacations, personal time, maternity/ paternity, holidays, sick leave, and even mental health days.

While at work, employees will be able to bank a certain amount of hours. These hours will translate into the number of days they will receive as PTO. Employees will have the authority to use these days at their discretion.

Unlike vacation time, a PTO does not require prior notification. For instance, you would not be able to predict when you are feeling unwell or mentally drained. These days can help you take the time you need to recuperate without taking away a day’s pay

PTO Benefits Employees and the Employers

One of the most enticing things about PTO for an employee is that they give you the privacy you need. As an employee, you will not need to disclose why you will need the time off, whether for personal reasons or a mental health day.

Many employees find PTO attractive because they do not need to ask for permission to take these days. Unlike the traditions system, an employee would notify their supervisor when they plan to be absent as opposed to asking them. The need to ask can make an employee feel like a child asking a teacher permission to leave the room.

Keep in mind that many companies may require you to notify them at least two days prior if you plan to take PTO unless you have fallen ill. Be sure to check your company’s policy to see what applies to you.

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An Employer can use PTO as a way to keep their employees happy. Giving an employee the flexibility to use their days is a great way to show them that the company cares about them. This has proven to increase company morale and increase employee performance.

Surprisingly enough, it lowers absences within the office. People become more aware of the number of days they have and try to bank as many days as possible.

Recent Changes to PTO Laws

One thing you should always keep in mind is that the law varies from state to state. Many states do not require a company to provide its employees with paid time off. This is something that is at the company’s discretion and is not enforceable by law.

Many companies will put a policy in place to provide their employees with PTO. Over the years, the PTO policies have changed and adapted better to serve both the employee and employer.

During the pandemic, many people were forced to remain quarantined at home. The year 2020 has been full of uncertainty; many families worry about where the next meal would come from. Some employers might even require you to use your PTO or vacation time to make up the time of your absence.

Because we are living in such trying times, emergency action was put into place. Back in March 2020, a bill was signed to aid those heavily affected by the pandemic. The Families First Coronavirus Response Act (FFCRA) specifically applied to companies and agencies with less than 500 employees.

Some employers were required to provide up to 80 hours of paid sick leave to employees that contracted COVID-19. This PTO was also made available for employees who had to stay home to care for their child because childcare facilities and schools had been closed. This act was put in place to protect the rights of those affected by the outbreak. Under this act, employers cannot discriminate or penalize an employee for their absence.

Changes To Paid Time Off From 2017

Back in 2017 many states mandated that companies provide their employees with paid sick leave. Because of this employees can earn up to 40 hours of paid sick leave each year.

Another bill that came into effect this year was the Family Leave for Parental Involvement in Education Act (FMLA). This Act was created for those in the workforce who had children. As many know having a child may take up time. Many parents want to have the flexibility to be there for their children. The FMLA allows them to have up to 8 hours every 30 days. This act can be used to take care of a sick child, attend school functions, or any other activity in relation to the child.

Lastly, President Obama signed an executive order back in 2015. This executive order known as Executive Order 13706, Establishing Paid Sick Leave for Federal Contractors (EO) did not go into effect until the year 2017. The EO requires federal contractors to provide their employees with up to seven days of PTO.

The Advantages and Disadvantages of PTO

An acceptable PTO policy can go a long way. Employees want to know that they are not just a pawn in the company. Offering them the opportunity to decide when they may take PTO shows them that they value the company. PTO allows an employee to take the time they need to gather their thoughts and helps prevent them from burning out quickly. Here is a list of advantages and disadvantages you will need to keep in mind when considering asking for PTO:

Advantages of PTO

  • PTO flexibility allows the employee to use the time to his or her discretion

  • Because employees are allowed to unwind, their productivity increases.

  • Some employees prefer to bank their hours and only save them for exceptional circumstances.

  • Usually, these hours go unused, saving the company thousands of dollars.

  • Giving an employee, PTO builds trust between them and their employer.

  • Having PTO helps prevent ill employees from coming into the office to fear losing their job if they miss a day’s work.

Disadvantages of PTO

  • Employees might take advantage of the system taking more time than they need

  • Multiple employees might take PTO at the same time.

  • It takes time to accumulate the hour you might need. Some companies might even give an employee 1 ½ days for every 30 workdays.

PTO Policy Average

In 2018 a study showed that the average amount of days an employee received for PTO ranged from 10 to 11 days per year. According to the U.S. Bureau of Labor Statistics, the number of days a worker is granted will slowly increase with the passing of time.

Length of time in at a company Average Number of Days
1 year 10-11
5 years 15-16
10 years 17-18
20 years 20-22
Adapted graph using data from the U.S. Bureau of Labor Statistics

Final Thoughts

Before you go about accepting any job be sure to verify if PTO is something you will be able to request. As an employee, you are responsible for keeping track of your PTO and how you use it. Remember that not every company will allow you to roll over your hours into the next term. Nor are they required to liquidate those hours, should you choose to resign or retire.

As an employee, consider using PTO as a way to recruit new applicants. Employees want to feel that the company cares for them, offering them PTO is a great selling point.

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Chris Kolmar


Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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