What is PTO?


PTO, or paid time off, is a leave entitlement that employees can request and use at their discretion. Oftentimes, companies will lump vacation, sick days, and other personal leave requests under the general “PTO” umbrella. However, some countries require annual leave and paid sick leave to be allocated separately. 

The amount of PTO an employee receives is often determined by a company’s location and defined PTO policy. The most common ways of issuing PTO allowance are accrued, allotted, and unlimited time off. 

  • Accrued - Accrued PTO is earned over time. For example, an employee may accrue 8 hours of paid time off every two weeks per their company’s PTO policy.

  • Allotted - PTO time that is allotted is usually given as a lump sum at the start of each year. For example, a company might give each employee 25 days of paid time off a year and refresh this amount on January 1.

  • Unlimited - Unlimited PTO is often used as a competitive benefit. This type of allowance encourages employees to take as many days off as needed without worrying about taking “too much” time off. 

While U.S. federal law does not require companies to offer paid time off, individual states have guidelines regarding paid and unpaid time off. Regardless of law, companies will often create generous PTO policies to attract employees. 

In Europe, workers are entitled to at least 4 weeks of paid time off per year. Each country in the European Union requires companies to offer 20 days of annual leave, though some countries like Sweden, France, and Spain, require companies to provide more than the standard 20 days off. 

How does PTO work? 

Depending on your company’s specific policy and procedures, an employee’s PTO balance is typically tracked via a platform or database. 

When an employee requests time off, they will indicate how many days they need. This request will then be sent to their manager or supervisor for approval. Once approved, the employee’s PTO balance will show the deducted time off. 

Can PTO be “rolled over” or paid out? 

Depending on a company’s specific PTO policy, an employee’s unused days from the previous year can be added to their refreshed balance. For example, you may have ten leftover PTO days from last year. If your company’s policy is to allow employees to roll over a maximum of five days, you would lose five of your unused days but carry over the remaining five.

Additionally, many companies pay out unused vacation days at the end of employment. This is a legal requirement in some states and countries and a part of PTO policy for many companies. Oftentimes, PTO payout is calculated on a pro-rata basis. 

Disclaimer: This article and all information in it is provided for general informational purposes only. It does not, and is not intended to, constitute legal or tax advice. You should consult with a qualified legal or tax professional for advice regarding any legal or tax matter and prior to acting (or refraining from acting) on the basis of any information provided on this website.

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