How to Set up the Right PTO Policy for Your Business

Here's a step-by-step plan for how to set up a PTO policy for your business.

First of all, what is a PTO?

PTO means "paid time off" and it can include:
- Sick days
- Holidays
- Vacation days

Some companies choose to lump all these together and treat them the same, other companies have separate policies for each one of those categories. Also beware of state-specific laws!

PTO is not protected time off, including
- FMLA,
- Voting leave
- and any other type of protected leave.

Do you have to offer PTO?
Technically at the federal level, you do not have to offer vacation time. However, some states, counties, or cities may require you to. So check on your local laws.

Should you offer PTO?
Well, yes! If you want to recruit and retain an awesome team, you better have a PTO policy in place.

Now that we have that out of the way, here are the main steps to follow;

1. What holidays do you observe? Outline them all [1:14]

2. How do your employees earn their PTO? [ 1:44]
There are two main types:
- Accrual PTO policy
- Unlimited PTO policy

You can also offer a "lump sum" approach, where employees don't have to earn the PTO; but that's not recommended.

3. How much time should you give your employees? [2:45]
Check out competitors in your area, and try to offer compelling PTO policies.

4. What happens when employees don't use their PTO?
You can add a cap to the amount that employees accrue. You could also offer them a cash out option.

Now you have the blueprint to create a PTO policy for your business!

--------------------------

Want more HR resources? Check out these out:

[READ] How does your PTO plan stack up? goo.gl/FY8GJh

[READ] What are use it or lose it PTO policies? goo.gl/7hZNCk

[WATCH] How to onboard an employee in 3 easy steps
youtube.com/watch?v=iEyjNiOZMi8

[WATCH] What You Need to Know About Form W-4: goo.gl/jkZzaU

[READ] Your New Hire Onboarding Checklist: goo.gl/pzWGYW

[READ] The Plan You Need to Make Your New Hire's First Day a Great One: goo.gl/ZDwWR5

Ask Gusto is a YouTube series designed to answer your top payroll, HR, and benefits questions. New episodes come out weekly — feel free to ask what's on your mind, and we'll answer it!

Who is Gusto, exactly? Gusto serves over 40,000 small businesses across the country with a refreshingly easy payroll, benefits, and HR solution. To learn about Gusto, visit: Gusto.com.

For more small business answers, visit us at: gusto.com/ask-gusto