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Paid Time Off – a Benefit to Both Employers and Employees

Time to RelaxAhhh…vacation. We all love it and look forward to it. It’s not only a fun and welcome change of pace; research has found that vacations are actually really good for our health! Stress reduction, heart disease prevention, improved productivity, and better sleep are just some of the health benefits that vacation can provide.

But have you ever wondered why employers would actually pay someone to take a vacation?

The concept of paid vacation was started by President William Howard Taft in 1910 with his proposal that every American worker needed two to three months of vacation each year, “in order to continue his work next year with the energy and effectiveness that it ought to have.” After World War II, companies were also interested in getting Americans to travel more, with the advent of new modes of transportation more widely available.

Vacation policies have evolved over time. What used to be known as “paid vacation” is now called “paid time off (PTO).” PTO combines vacation, sick time and personal leave into a pool of days for employees to use at their discretion. Employers have found that employee satisfaction and engagement are pretty strongly linked to their PTO policy and that it makes good business sense for several reasons:

  • Employees get accustomed to their paycheck amounts being level and consistent from week to week. This concept applies to holidays too – business owners realized that it would be off-putting to employees to only get paid for four days of work if the business is closed on the fifth day because of a holiday. The practice of maintaining a level paycheck was also extended to PTO.
  • Employees are more productive when they get time to rest and recover. Employers realized that the benefit to their businesses in terms of productivity outweighed not having the employee present to do work.
  • Sick leave allows employees to not feel compelled to work when they’re sick and gives them the ability to stay home and recuperate. This, of course, also helps prevent the spread of germs among other employees. Obviously, the productivity of the office is much higher when the entire staff isn’t out with the flu at the same time.

There are two important points about PTO that I emphasize with clients. The first is that employees may request PTO, not demand it. They can present their requests for time off to you, but as their employer, you have the right to say yes or no.

The other point is that you should have a clear policy about whether PTO is accrued over the course of employment or earned. If it’s earned, then they ‘own’ it – which matters if they end up leaving the company. In that case, the paid leave would be due upon their terminating employment.

In any case, your employee handbook needs to be clear about whether employees accrue or earn their PTO. If you need assistance with your written policies, MarathonHR is here to provide our expertise and counsel.

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