The Difference Between Vacation and Paid Time Off
The Difference Between Vacation and Paid Time Off

The Difference Between Vacation and Paid Time Off

Once upon a time it was the norm for employers to offer separate paid time off benefits to employees, differentiating sick leave from personal days and paid vacation. Today, however, a growing number of organizations have moved to a more flexible paid time off (PTO) benefit that incorporates all policies into one all-inclusive plan.

The debate continues as to whether employers benefit from offering PTO versus separate vacation, sick and personal leave plans. In some instances, state law dictates what an employer can offer because there are legal obligations attached to it, such as:

In any case, it’s important for an employer to be clear on their PTO policy while staying within the law. Here are some key differences as well as of the pros and cons to consider before offering employees a singular PTO policy.

Advantages of a PTO Policy

The terms PTO and vacation often are used interchangeably by employees, but they’re not actually the same thing. PTO is considered to be any time an employee is getting paid while away from work—it’s more encompassing than “vacation.” Think of it like this: all vacation is PTO while not all PTO is vacation.

Other examples of PTO include maternity/paternity leave, jury duty, sick leave, holiday pay or disability leave. In fact, part of the 2017 tax reform bill states that employers who provide between two and 12 weeks of paid family and medical leave can receive a tax credit.

Some other advantages to PTO programs include:


  • Employees appreciate the flexibility PTO plans provide.
  • Employees aren’t incentivized to lie about being sick or having a doctor’s appointment in order to use their allotted sick days, resulting in a more honest and transparent employer/employee relationship.
  • Employees and human resources only have to track PTO hours as opposed to separately tracking hours for vacation, sick and personal days.

Research consistently shows that incorporating a PTO policy will result in employees taking more vacation time and less sick days. This benefits employers in two ways—first, employers typically receive more notice about scheduled vacations and can plan for adequate coverage. Second, employees return to work more refreshed and productive following vacation leave—which doesn’t happen if they’re using sick days.

Disadvantages of a PTO Policy

There are a few potential downsides (depending on how you look at it) to creating a PTO bank that HR professionals should keep in mind.

  • Employees will most likely use their PTO whereas personal and/or sick days may be left unused.
  • Employees tend to save all their PTO for vacations and come to work when they’re sick—and you know that’s how office plagues begin.
  • In some states, accrued (yet unused) PTO must be paid to the employee upon his/her last day of work but unused sick/personal time doesn’t.

most and least PTO days used by state

Is Unlimited PTO a Good Idea?

These days, there’s tough competition for talent, and organizations may be tempted with the idea of offering unlimited PTO as a way to attract quality new hires. After all, what could be better than unlimited days off work?

Despite how dreamy it sounds, the reality is workers who are offered unlimited “vacation” rarely take more than other employees. Which might explain why only 4% of companies in the U.S. offer unlimited PTO, according to the Society for Human Resource Management.

If you are considering an unlimited PTO policy, there’s a couple things to remember. First, such a benefit isn’t appropriate for nonexempt employees whose paid time is governed by wage and hour laws and gets overtime for working more than 40 hours a week. Second, in states where an employer is required by law to pay an employee a monetary amount equivalent to the amount of unused vacation time upon his/her last day of work, how could you determine an “unused” amount of time?

Unlimited time off might also cause issues with the Family and Medical Leave Act (FMLA) which requires employers to allow available paid leave to run simultaneously with an employee’s FMLA leave. If there’s no limit to paid time off, does that mean an employee’s entire 12-week FMLA leave will be paid?

Time Away from Work is Good

Whatever sort of vacation, sick or PTO policy you implement in the workplace, be sure to encourage your employees to use it. Create a culture that supports time off—make sure managers lead by example and take vacation days. Eliminate the guilt factor by showing a true interest in where employees travel (ask questions, look at photos). Perhaps even pay your employees to go on vacation by offering a financial incentive to be used for flights, hotels or food.

Don’t let your team be one of the 52% of U.S. workers who leave unused PTO on the table at the end of the year*. If your organization needs help with HR and benefits administration, Paycor is here to streamline the process and make it more efficient for you and your employees.

Paycor Can Help

Don’t let your team be one of the 52% of U.S. workers who leave unused PTO on the table at the end of the year*. With Paycor's online time and attendance software, employees can request time off, see how much PTO they’ve accrued and easily access employer PTO policies. But that’s just the tip of the iceberg. Employees can also clock in and out, manage their schedules and view pay stubs, all while on the go. Want to learn more? Talk to a Paycor consultant.

Source: U.S Travel Association’s Project: Time Off report


hcm-software

More to Discover

Webinar: Benefits in a Pandemic: What HR Leaders Need to Know - 11/10 @2PM ET

Webinar: Benefits in a Pandemic: What HR Leaders Need to Know - 11/10 @2PM ET

Building a benefits program for a diverse workforce has always been a top priority, but now it’s become both more important and complex. With so much change and uncertainty at work and home, employees are struggling to cope with isolation, loneliness and added stress. They may wonder if their employer is doing enough to help. This is an opportunity to come through for your people. It’s an opportunity to reevaluate your benefits offerings to make sure they deliver real value. With the right guidance and planning, your benefits program can be an unbeatable competitive advantage that drives retention and helps your company live up to its ideals and stand out from the crowd. Register for this webinar to learn new insights on the benefits...

[Infographic] How Benefits are Changing in the COVID Era

[Infographic] How Benefits are Changing in the COVID Era

The impact of COVID has stretched far and wide, forcing HR and business leaders to evaluate their benefits and think beyond traditional offerings. With many workforces dispersed and working remotely, employees are struggling with loneliness, isolation and increased anxiety. As a result, employers are enhancing healthcare benefits like telemedicine, expanding wellness programs and adjusting paid time off to offer greater flexibility and support during these uncertain times.As you prep for open enrollment and beyond, check out our latest infographic that highlights emerging benefits that really matter to your people.

Webinar: Gratitude Webinar Series: 5 Employee Appreciation Ideas Your Workforce Will Love - 11/12 @11am ET

Webinar: Gratitude Webinar Series: 5 Employee Appreciation Ideas Your Workforce Will Love - 11/12 @11am ET

Expressing gratitude or saying "Thank You" may seem simple, but it's a lost art. As HR and business leaders, we have a unique opportunity to recognize the hard work, the sacrifices and the commitment employees put into their jobs each and every day.As we celebrate National Gratitude month in November, this session will offer tips to express gratitude and appreciation for employees in a more effective and meaningful way.Speaker: Colin Ethier As manager of content marketing and HR Researcher, Colin is responsible for creating innovative content and webinar strategies that drive demand and showcase Paycor’s differentiating expertise in the HCM market. Prior to his role in content marketing, Colin supported internal communications at...

Webinar: October Virtual Summit - Winning At Work: How to Help Employees Thrive in the Midst of Pandemic & Change

Webinar: October Virtual Summit - Winning At Work: How to Help Employees Thrive in the Midst of Pandemic & Change

In the midst of so much change in 2020, one thing remains constant: employees depend on HR leaders for support and help. But what happens when you throw virtual workplaces, shutdowns and uncertainty into the mix? For starters you may see a loss in employee motivation and productivity.So, how can you better support employees and help them thrive? Watch this session to find out. Speaker: Joey Price Joey Price is the CEO of Jumpstart:HR, LLC - a Managed HR Services company that was recently highlighted by Inc.com as one of “7 Startups Making Life Easier for Small Business Owners.” He also hosts “Business, Life, and Coffee” a podcast focused on personal development for busy professionals. Joey brings over 10 years of experience in the HR...