PTO vs Vacation: What’s the difference?


Is it important for you to know why your employees are taking time off?

Perhaps, you think that giving them more control over their vacations is a better option for your company.

Well, knowing the difference between PTO vs vacation will help you determine the ideal solution for you.

People often confuse paid time off with vacation days.

However, their stipulations will depend on the company’s policy as well as federal regulations and state laws.

So, in this post, we’re going to discuss PTO vs. vacation.

We’ll explain how they are different while giving tips for employees on how to use them effectively.

What Is PTO?

An abbreviation of the term “paid time off,” PTO is an all-inclusive time-off package that allows workers to use a set number of days for sick time, vacation, or personal time.

They can take these days off without any loss of pay. Most of the time, employees are not required to explain where they will use their PTO credits.

Also, many businesses do not have to roll over unused PTO to the next year. However, the “use it or lose it” policy is prohibited in some states such as Nebraska, California, and Montana. So, make sure that you review your state labor laws before creating your PTO policies.

What Is a Vacation?

In general, a vacation is a time taken off work to recharge and rest. In most cases, it is paid. However, some companies allow employees to take additional vacation days, albeit unpaid.

As evident in a University of California study, taking a vacation is crucial in helping people feel less stressed and more energized. Unfortunately, the Fair Labor Standards Act does not require companies in most U.S. states to offer paid vacations.

PTO vs Vacation: How Are They Different?

The terms PTO and vacation are often used interchangeably. However, while they have similarities, they are not the same.

The main difference between PTO vs. vacation is the level of flexibility they offer. Here’s how they are different:

Coverage·   Sick time·   Vacation·   Maternity or paternity leave·   Personal time off·   Mental health days·   Jury duty·   Bereavement·   Volunteer workTime taken off work specifically for rest or relaxation
Level of flexibilityHigh Flexibility -Can be used however an employee sees it fitLow Flexibility –Can only be used according to the vacation policy
Level of privacyMore Privacy –No need to declare the reason behind the leave requestLess Privacy –Employees are expected to explain their vacation time request
LengthShorter but more frequentCan be longer – up to 22 days annually
TrackingEasier to track because a single policy covers various types of leaveDifficult to track because vacation days are offered separately from personal and sick days

What Are the Types of PTO

There are different ways employers can allocate PTO, including:

Unlimited PTO

In recent years, unlimited PTO started gaining popularity. In this scheme, employees can take an unlimited amount of paid time off. However, they have to meet certain conditions like completing work requirements within a period. Most of the time, using this system promotes efficiency and productivity in the workplace.

Accrued PTO

Under this PTO scheme, employees accumulate paid time off for every work hour they log. Also known as a PTO bank, accrued PTO allows individuals to use their leave credits to take time off whenever they need. Companies determine the rate of the PTO per hour:

  • Daily – This system allows workers to collect PTO time for every hour they spend working each day. This scheme is ideal for eight-hour shifts or companies that hire part-time employees.
  • Bi-weekly – This method lets employees accumulate PTO credits on a bi-weekly basis. So, this means that the paid time off increases 26 times every year.
  • Monthly – This scheme allows individuals to collect a percentage of their PTO credits every month. Companies usually use this method to compute PTO rates.
  • Annually – Businesses with long-term contracts with employees prefer this system. It gives workers an annual PTO, which they can use at any time.

Fixed PTO

With a fixed PTO scheme, companies allot a particular number of PTO credits per year to every employee. A worker can use any amount of the PTO credits whenever they want. The PTO amount also renews every year. Some businesses even roll over the unconsumed credits to the next year.

What Are the Pros of a PTO Policy?

If you’re thinking about creating a paid time off policy for your employees, you should consider the scheme’s pros and cons.

There are benefits and cons to every type of policy. So, you must perform a thorough analysis to determine which is right for your employees and company.

Here are some of the advantages of a PTO policy:

Easier to Manage

The traditional leave policy requires employers to manage various types of leave. In contrast, a PTO policy is easier to track because all the types of leave are lumped together.

More Flexibility for Employees

A PTO credit can be used however an employee wants. They can take a vacation, maternity leave, or sick time and take it from their PTO credits.

A worker doesn’t even have to explain how they’re using their PTO.

Because a PTO policy offers more flexibility, employees are less likely to commit unscheduled absences.

According to an Alexander Hamilton Institute study, 54% of companies that implanted a PTO policy saw a 10% drop in absences.

Transparent Relationship

Some employees feel like they’re wasting leave credits when they can’t use their sick days. So, they lie about getting sick.

On the other hand, a PTO policy does not require them to explain why they need the time off. They can use it for whatever reason they like.

What Are the Cons of a PTO Policy?

More Expensive

Depending on the labor laws in your state, having a PTO policy may end up being costlier than a traditional leave program.

If an employee leaves the company, you may be required to pay out their accrued PTO.

On the other hand, in a traditional leave system, employers do not have to pay out sick leave once a worker resigns.

Health Risks

There are employees who would come to work even when they’re sick just to earn more PTO.

Of course, when this happens, they may end up infecting other workers, which can affect the company’s overall productivity.

Fewer Days Off

The accrual rate of PTO for some companies causes new employees to accumulate leave credits more slowly than tenured workers.

Also, studies discovered that businesses give fewer days off with a PTO policy. An SHRM survey found that the average days off that employees get is 18 days.

This amount is fewer than what workers usually get under a traditional leave policy.

What About Unlimited PTO?

Since a PTO policy can have certain disadvantages, companies are thinking of ways to improve it. Also, over the years, the competition for acquiring top talent has become even tougher.

So, many companies have been offering unlimited PTO to attract highly skilled and experienced employees.

Now, while unlimited PTO may sound enticing, workers who have this benefit rarely take advantage of it. This explains why the 2020 SHRM Employee Benefits Survey revealed that only 7% of U.S. companies offer unlimited PTO.

So, if you’re thinking about offering an unlimited PTO policy, you should consider the following:

If you have non-exempt employees who get overtime pay for time logged over 40 hours a week, this benefit scheme is not appropriate for them.

Does your governing state require companies to pay a resigning employee a monetary equivalent of their unused PTO? Things can be complicated once you calculate the unused PTO credits.

Your PTO policy may come in conflict with the Family and Medical Leave Act. This law allows employees to get up to 12 weeks of unpaid leave per year.

Under your PTO policy, do you have to pay for the FMLA-protected leave?

Tips for Employees: How to Make the Most Out of Your PTO and Vacation

An Austrian study discovered that time away from work can help improve an employee’s well-being. Meanwhile, a separate study revealed that getaways, especially those taken in warmer climates, let workers recuperate from workplace stress. As a result, they are more productive once they get back from their vacation.

Indeed, employees enjoy benefits by taking time away from work. However, if you want to make the most out of your vacation, we recommend doing the following:

Submit All Pending Tasks

Before you take your paid time off, make sure you complete all unfinished work. This way, you won’t get interrupted by urgent work emails or calls during your vacation.

Besides, while you’re away, work will continue progressing smoothly.

So, before you even file your PTO request, you should plan how you will complete all your assignments.

Learn how to prioritize tasks effectively and make sure you have a timeline on when you’ll accomplish them. This way, you’ll have enough time to get things in order.

Allocate Your Tasks

While you’re away, there should be someone who can manage your clients or handle your tasks. Usually, companies have a system for managing the workload when a worker takes time off.

Now, if you don’t have such a program in place, you can ask a coworker to handle your assignments while you’re away.

Also, make sure that your stand-in knows how to do your job. Don’t forget to leave them your contact details in case something urgent comes up.

Inform Your Manager

It is good professional etiquette to inform your employer that you’re taking time off from work. You should do this even when your manager does not require it.

After all, such a practice shows that you respect your supervisor and your colleagues.

What’s more, informing your manager allows them to get things in order for your absence. Ideally, you should do this in person. However, in most cases, an email would suffice.

Inform Your Customers

If your line of work requires you to manage clients, you should also let them know about your vacation. Your customers likely have preferences for scheduling your services.

So, if you value their patronage, you should inform them about your leave.

Doing so will help you strengthen your professional relationship. You can let them know about your vacation via a short phone call or a brief email.

Also, if you have a stand-in, ask them to do some of your client management tasks for you.

Plan Your Return

You should also think about settling back into work after your vacation. You’re probably excited to take your time off. However, planning your return can help lower your worries about getting back to your tasks.

When preparing for your return, talk to your manager about the possible tasks you’ll expect. You should also discuss how you can organize your assignments for your return.

This way, it will be more convenient for them to transition your tasks back to you.

Mange Leaves with Ease

Whether you’re using a PTO policy or a traditional leave program, you need to ensure that the vacation system is easy to manage.

Things like these can be a lot easier when you have online timesheets. You can make the entire process even more convenient by automating it.

For instance, with the Traqq time tracker, you can automatically generate timesheets for individuals and entire teams. So, it will be easier for your accounting department to calculate payroll for a specific period.

Notify of

Inline Feedbacks
View all comments

Related articles

Jul 17, 2023

What Is Base Salary And How To Calculate It?

Nov 23, 2020

What Is Human Resource Management? Scope, Objectives, and Importance

Mar 31, 2023

How to Manage Employees in Different Time Zones?