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What Is Paid Time Off (PTO)?
3.5 MINUTE READ | 2 MINUTE SKIM

What Is Paid Time Off (PTO)?

Definition, recent updates, and compliance with paid time off regulations

Paid time off (PTO) is an employer-provided benefit that grants employees compensation for personal time off, vacation days, federal holidays, sick leave, and maternity and paternity leave. Paid time off policies are not a requirement of the Fair Labor Standards Act (FLSA).

Recent Updates

As the needs of the modern employee have evolved, so have state and federal paid time off (including sick leave) policies. Even though paid time off is not a requirement of the FLSA, a recent survey suggests some employees would prefer more time off in lieu of a raise. As a result of demand, many states have mandated their own paid time off and sick leave policies.

Paid Time Off 2017

July 1, 2017 — Several states passed mandatory paid sick leave laws. Employees that meet certain criteria in Arizona, Minneapolis, Georgia, and Chicago now have the right to earn sick leave on average, 24 to 40 hours per year. These laws protect workers, should an employer try to terminate employees for using accrued sick leave.

February 16, 2017 — The Working Families Flexibility Act was proposed by Rep. Martha Roby (R-AL) and passed to the House of Representatives. The act would amend the FLSA to allow private-sector employees to receive compensatory time as opposed to paid time off. Under the act, employees would not be forced to accept comp time, and they wouldn't be able to accrue more than 160 hours of comp time per year.

Paid Time Off 2016

September 19, 2016 — The Family Leave for Parental Involvement in Education Act was introduced to grant employees up to eight hours during any 30-day period "to participate in or attend school conferences or activities … related to a program attended by the employee's child or grandchild." Under the proposed act, employees could choose, or employers could require, the substitution of paid time off or sick leave.

Paid Time Off 2015

September 7, 2015 — President Barack Obama signed an executive order to establish paid sick leave for federal contractors. In an effort to promote health and performance, these employees (about 300,000 in total) can earn one hour of paid sick leave for every 30 hours worked. The order went into effect on January 1, 2017.

Compliance With Paid Time Off (PTO) Policies

1. Accessible PTO Accrual Balance and History — Many state sick leave and paid time off policies say employers must always keep employees up to date on their accrual balance and history. The most common place to keep this information is on each employee's pay stub, though it may also be kept in a time tracking system accessible to employees. With an automated time tracking system, business owners can ensure employees are accruing and using PTO at the correct rate.

Mobile time tracking apps keep employees up to date on PTO.

2. Employee Classifications Affect Accrual Rates — While some state paid time off policies specify how much leave employees can accrue, others mandate accrual by the number of employees at the company or by employee classifications. Arizona's Prop 206 says businesses with over 15 employees must grant those employees 40 hours of leave per year. Less than 15 employees and the minimum is 24 hours per year. Meanwhile, qualified workers in Georgia can accrue at least five days paid time off each year.

What you need to know about employee classifications and time tracking.

3. Detailed Records of Company and State PTO Policy — Incorporated in many states' sick leave and paid time off policies is the need for employers to keep accessible records of the state's and the company's policy, usually in the form of a poster, handbook clause, or other means. These records inform employees how much PTO they can accrue and what they can do with their time accrued, as well as their rights should their employer retaliate or punish an employee for taking sick leave or PTO.

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Paid Time Off (PTO) Summary

PTO stands for "paid time off," and it's how employers give employees paid leave from work. Paid time off is considered a workplace benefit that is not a requirement of the Fair Labor Standards Act, though several states have mandated their own PTO laws and protections for employees.

The definition of PTO isn't limited to just sick days. In order to better care for the needs of the modern workforce, paid time off can include personal time and family leave, as well as vacation time, federal holidays, and maternity and paternity leave. Depending on the state you live in, other conditions may also be covered under paid time off. Many employees can use PTO in hourly increments to take care of immediate family members or even take preventative measures against domestic violence.

While employers cannot refuse to allow employees to accrue paid time off or use paid time off as a disciplinary action, they can update company policies to suit their needs. For example, employers may ask that employees provide documentation for sick leave absences exceeding a certain number of days. In some cases, they can also decide how long an employee must work for the company before they can use their PTO (the average is 90 days).

If your company is affected by your state's paid time off policy, it's best to consult with your lawyer or employment counsel before implementing major changes at your company.


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