Crafting an Effective Paid Time Off Policy

30 Oct 2019

As the importance of work-life balance and flexible scheduling increases for employees, it becomes important for practices to have an effective Paid Time Off (PTO) policy that both provides the benefits employees seek but also meets the needs of the practice staffing. When discussing PTO, we are generally referring to the complete amount of time a practice will offer as compensated days off to its staff, including vacation, personal, holidays and sick time. The employer and the employee will have an adverse interest here; the employee will look to have the most PTO days as possible and the employer will look to limit. As a result, striking a compromise between these interests is the best way craft an effective PTO policy.

Many employers look toward traditional methods and standards when it comes to setting a PTO policy. The number of days (or hours) granted is typically commiserate with experience, position and the marketplace that they operate in. These policies are typically setup with 2 weeks (10 days or 80 hours) vacation for entry level and early experience employees, 3 weeks (15 days or 120 hours) for front-line supervisors, team leads and experienced staff, 4 weeks (20 days or 160 hours) for managers and 5 weeks (25 days or 200 hours) for executives. Some healthcare practices may normally find themselves closer to the high end of these ranges even for entry level or experienced professionals, as the specialization leads itself to an expectation of more time off. Firms also will generally offer a fixed number of sick days, typically between 5-10. Many employees view these as just additional PTO that can be used generally, and as a result will use them more frequently.

As counterintuitive as it may seem, an “unlimited” vacation and sick time policy is often a great tool in both offering employees the ultimate in flexibility and benefits and may reduce the overall number of PTO time taken by staff. Many studies have shown these policies can reduce the number of PTO days by up to 13-15% over the year. The general logic behind this is that is employees are given a fixed number of days, they are going to make sure to use each day (both vacation and “sick”) days each year, rather than as they need. Further, this flexibility is very much attractive to younger talent and also empowers the employee to make decisions and fosters a sense of trust, and the policy is much easier to implement and maintain than traditional polices. As part of this, it is important to stress to employees that the work must still be completed.

Another feature of an effective PTO policy is something that is not necessarily part of the policy itself but is very important is the workplace culture around PTO. As companies and employees become more connected, there has been an implicit expectation that employees will always be available to respond to requests immediately. Further, many workplace cultures have (unfortunately) organically developed a competitive, workaholic culture that can discourage many employees from taking PTO. Studies have shown that using of PTO and disconnecting can overall increase productivity and reduce burnout. As an employer you should work to develop a culture that encourages employees to disconnect and respects the boundaries of their time away; your company as a whole will benefit as will the staff.

Having a strong PTO policy can also attract potential employees to your company. People strongly value having personal time to spend with their families, or however they see fit, so potential candidates can be drawn into a company based off their PTO policy. This could allow the company to have many options to choose from to fill an opening with the best possible candidate. An effective policy is one that both allows the employee to feel satisfied but meets the needs of the practice.


This article was also featured in our newsletter Best Practices Vol. 18