Simple and Easy Guidelines for Creating a Paid Time Off Package - By Katie Conroy 3/30/2022

When crafting a paid time off (PTO) policy for employees, new business owners may not be sure how to start. You know you want to come up with benefits that are satisfactory for both you and your employees. It must be clear and easy to understand, without any vagueness or unintended loopholes that could lead to you being cheated. And you certainly don’t want to violate any business ethics principles, treat your team members unfairly, or even open yourself up for a lawsuit. You can tackle this project on your own or seek the assistance from a professional human resource consultant, such as HR Solutions, LLC. They can help guide you through the basics you need to think about to create a good, clear policy.

What, precisely, is a paid time off policy?

First, it’s important to distinguish between PTO and paid leave. With PTO benefits, an employee is granted a certain amount of time which they can take off for any reason, and still be paid as though they were working. Paid leave policies, by contrast, have to do with time taken off for specific reasons such as going on vacation, being homesick, or having a new baby. When you grant your employee PTO benefits, think of it as essentially creating a “bank” or paid time off that they can draw from as needed.

The importance of having a good PTO policy.

A good PTO package is one of the things that will attract employees who want to work for your company and keep them motivated to give you their best because they know you take good care of them. Having a clearly defined PTO policy is useful for your employees because it will help them figure out how to budget time and money most effectively.

How much PTO should you offer?

Obviously, you need to clarify how much paid time off an employee is entitled to upfront. Typically, employers offer about ten days of paid time off for employees who have been with the company for one to five years, but if you’re putting all paid time off in one bundle you should probably add extra days, to cover other needs, such as sick days. Also, consider whether you want to offer paid time off for federal holidays.

Additional clarifications.

Employees should have a clear understanding of how they can earn additional paid time off, over the duration of their employment, and how long it will take. Also, you need to figure out if their PTO will be front-loaded, or if it will accrue. And if it accrues, will any unused time roll over into the next year? Or will the employee be paid for that time? If an employee leaves, will they be entitled to a payout from any unused PTO? You need to clarify when they can start using their PTO, also.

Come up with a process for requesting and approving PTO.

One of the most important things you need to make clear when you create your PTO package is the protocol for submitting requests for paid time off. If this is unclear or poorly organized, this will lead to major headaches both for your business and for the personal lives of your employees. Make it clear how far in advance your employees will be required to request time off. And have a single, set format for doing so, so information doesn’t get lost or duplicated, and so everyone is on the same page.

Writing up a PTO contract.

Once you have ironed out the protocols and anticipated all possible questions, you need to get everything written out in a single document that both you and your employees will be able to sign, and later reference, if need be. Using a pdf is a good way to make the document available for both you and your employee to sign, but remember, if you need to edit a document, you will probably need to use a conversion tool to convert a PDF to Word, then change it back to save it after revisions.

Having a good PTO package can be a major bonus for your company, as employees who get paid time tend to be more motivated, positive, and dedicated. But it is important for that policy to be clearly articulated. That will avoid any confusion and also help to highlight the generosity of what you’re offering – which, in turn, attracts the kind of employees you’re looking for!


HR Solutions, LLC was established in 2013 with the mission in mind: to make the work world more harmonious, enjoyable, and productive. HRS assists organizations with services to define, align, and sustain their desired corporate culture through leadership development, workforce training, human resource consulting, leadership success coaching, and speaking engagements. We’d love to hear from you!



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