How We Structure Paid Time Off For Full-Time Employees

One of the many decisions that requires some effort when hiring full-time employees is how to structure paid time off. We put a lot of thought into these decisions in 2010 when we brought on our first full-time employee. Since that time we’ve found that these policies have worked out really well for a small company like ours.

PTO vs Sick Time + Personal Time + Vacation Time

This, I think, is the first choice we made. Should we divide up sick, personal, and vacation time, or should we lump it all into one chunk of paid time off (PTO)? We went with the PTO option because it’s easier to manage. We only have one number to track. When someone says they’re sick, we don’t need to try to parse whether they’re actually sick or just wanted to take a day off without tapping into their vacation time.

The big downside that we anticipated was that employees would come to work sick because no one wants to use their future vacation time on a sick day. To get out in front of this, we also instituted a common sense policy that no one was allowed to come to work sick. If they did, they would be politely sent home. For the most part over six years this has worked out. If someone needs extra PTO for a vacation because they burned a bunch on being sick, we’ll typically come up with a project for them to earn it back. It also helps to remind everyone each year that their PTO includes everything and to plan accordingly.

Since we’re so small we limit time off during the holidays to avoid someone getting slammed with work because other people are out. We’ll occasionally ask the team not to take time off during certain days if we think we’ll need all hands on deck, but nothing is ever set in stone.

We also have fairly standard policies for maternity leave, paternity leave, and bereavement. Those days do not count against PTO, although you always have the option of extending that time with PTO.

Charge Time In Days Or Hours?

To keep it simple we track everything by days instead of hours. You can charge a full day or a half day, but nothing in smaller increments. If someone needs time off for a doctor’s appointment or needs to come in late for any reason, we allow them to flex their time. They typically make it up by leaving late that day, but they can also make it up by coming in early or leaving late within a few days before or after the time off.

Rollover Time vs. Use-It-Or-Lose-It

Another big decision we made was not to allow time to be rolled over from year to year. Most people don’t like this at first but warm up to it after we explain. We want people to use their time. It’s not healthy to work without the occasional extended break. By not allowing time to be rolled over, it forces people to plan some trips or at the very least some time away from work. As a small business it’s also not very practical to have someone save up time for several years and take one long vacation. Of course, we can (and have) made a few exceptions to this rule when there’s a specific reason to do so.

Accrual vs Yearly Lump Sum

Vacation days don’t accrue with us. Our vacation time runs from March 1st – February 28th. Each March 1st time resets and they have all of their time for the year to use how they see fit. Our least busy season is the winter, so we chose that time for vacation time to reset for a few reasons. First, it encourages anyone who has time left to use it at a time of the year when we’re not busy. Second, February is when we do our employee reviews and give raises and/or increases in PTO (also because it’s not as busy) so making everything effective March 1 makes a lot of sense.

What About Us Owners?

We don’t have a set number of days for ourselves. We have much more flexible schedules in general, both in terms of time and location, and often work more on nights and weekends as needed, as opposed to strictly working at our warehouse for 8 hour days. We do track our time off using the same Google Spreadsheet that updates a shared Google Calendar. On average, we tend to take about the same amount of vacation time as our employees do, which I think is good for us and good for team morale.

Overall it’s nice to see that these policies have withstood the test of time these past six years. I’m sure as we grow we’ll continue to tweak and adjust as needed.