Paid Time Off Plan

Posted in Human Resource Terms, Total Reads: 188
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Definition: Paid Time Off Plan

Paid time off (PTO) is a number of hours that employees can use to pool sick days, personal leave or vacation while being paid as a working day. Different companies offer different hours as paid leave depending on their policies, compensation plans and retention strategy. There is no government policy that regulates the number of hours companies must offer as paid time off.


Absences are also calculated under the Paid time off hours provided to the employee. Some companies allow employees to carry forward unused Paid time off hours into the next financial year whereas others dissolve the unused hours at the end of the year. However PTO does not cover sabbaticals or long term medical leave.


Most organizations provide around 2 weeks of Paid time off hours per year however some companies like Netflix and Virgin have no PTO limit. Employees of Virgin UK and US are allowed to take as many PTO hours off as they wish as long as the work is completed on time.


An advantage of using this plan is that employees would schedule their PTO in advance and hence the organization can plan around the absence of the individual. Another advantage is that employees feel that the organization cares about their work life balance and hence help retain the employees in the long term.


A disadvantage however is that employees are being paid even though they are not being productive. Furthermore many employees may want to cash in on their unused PTO hours near the end of the year hence resulting in lower productivity.

 

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