What is Paid Time Off (PTO)?
Paid Time Off (PTO) refers to the designated time that employees are allowed to take off from work while still being paid their regular wages or salary in their absence.
Specific PTO policies can vary widely depending on an organisation’s location and the legal requirements of its operating country or region. If a company’s employees are based in different jurisdictions, the local laws where they reside will determine the minimum allotments they are entitled to.
Each country stipulates how much PTO should be offered. In most countries, there are very strict PTO minimums mandated by law – usually 20 days. The biggest exception to this is the US, where paid time off is not required by law. However, paid vacation is often offered as an employment benefit.
Paid time off is a fundamental part of employment law and workers’ rights. Governing bodies and agencies such as the European Foundation for the Improvement of Living and Working Conditions (Eurofound) work to put stringent requirements on its member states to give these minimums.
Employers typically outline the rules and procedures for requesting and using PTO in their employee handbook or company policies.
What are the different types of PTO?
Paid Time Off can refer to a number of different types of leave with the most popular and well-known being vacation days, sick leave, public holidays, and parental leave. That said, in certain countries, sick leave and parental leave may not be paid.
Vacation days
Vacation days are time off that employees can use for leisure, rest, travel, or personal activities. Employers must follow each country’s guidelines regarding the minimum number of vacation days they provide to employees as well as whether any ‘blocks’ of those days are to be grouped together (such as is the case in Brazil).
Tenure sometimes influences the number of days, such as is the case in Mexico and Singapore, where workers receive a progressive rate of days off. In other cases, employers may also decide to ‘top up’ vacation days, which can have no cap and be unlimited. Data suggests, however, that people end up taking less vacation days when given an unlimited amount, so simply offering a generous but limited number of PTO days may be the best solution.
Sick leave
Sick leave (or 'sick days') are time off for employees to recover from illness or attend to medical needs. Some companies may also allow workers to take sick leave to care for a sick family member, such as an ill child or elderly parent. In certain countries, caring for others may fall under ‘carer’s leave’, which sometimes represents statutory paid leave.
There’s a great deal of variance in how sick leave is handled from country to country. In some places, sick leave may be covered at 100% of a worker’s salary rate. Alternatively, the law may dictate that an organisation may pay the equivalent of the local minimum wage for the day. Some governments also assist in covering sick leave payments instead of requiring employers to pay all or any of a worker’s sick leave wages.
Public holidays
Public holidays (also referred to as ‘statutory holidays’, ‘national holidays’, ‘bank holidays’ or ‘legal holidays’) are days that are recognised and designated by a country's government as official days off. On these days, most businesses, government offices, schools and other institutions are typically closed.
Employers have to grant public holidays to their employees and cannot force them to work on those days. In cases where workers need and agree to work on public holidays, most countries require businesses to pay them at a higher 'holiday pay' rate, such as ‘time and a half’ or 1.5 times the normal wage for hourly workers, or to offer other days off in lieu of the public holiday. In certain countries, such as the UK, businesses are not required to pay employees for public holidays.
Other paid leave
These are additional days off that employees can use for a variety of personal reasons, not covered by vacation or sick leave. Different countries may stipulate different types of personal leave
In some countries, examples of leave that are considered a statutory right category include maternity and paternity leave, parental leave (after maternity leave), childcare leave, adoption leave, bereavement leave, blood donation leave, education leave, domestic violance leave, and so on. Companies can also elect to proactively add various paid leaves to employees such as volunteer leave, mental health days and study leaves.
How does PTO work?
In most countries, workers are allowed a certain number of statutory PTO days, plus whatever the company decides to offer its employees. These days are used at the workers’ discretion over the course of a year’s employment, usually a calendar year. In certain jurisdictions, PTO allotments may reset in other parts of the year such as from July to June.
Employees generally have the year to use up their PTO allowances. If they don't, they may be able to transfer a few days into the following year. However, this isn't always regulated by law and oftentimes falls to the discretion of the company.
Alternatively, some organisations may choose to allot each employee with a specific number of days for each type of leave (in addition to PTO days that are already required by law) – such as 4 weeks of vacation, 10 days of sick leave, and so on – that workers must ‘deduct’ from each year. These allotments also reset once per year.
However, other organisations choose to implement a ‘use it or lose it’ policy – meaning that any unused PTO does not roll over and is instead ‘paid out’ in wages. In some rare cases, unused PTO under a ‘use it or lose it’ policy may be lost altogether.
Work with Boundless
As an Employer of Record, Boundless handles all local employment specifics, and part of that is paid time off. We’ll advise you on all statutory PTO rights in each country where you employ workers and can help you figure out how to harmonise the varying allotments between different countries. (For example, within our own company, we use the country with the highest number of days as a benchmark and give that allowance to everyone in the company.)
Speak with one of our experts to learn how we can help you build a global team.
