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The Link Between Paid Time Off (PTO) & Employee Retention

written by: Vikas Vij•edited by: Jean Scheid•updated: 2/10/2011

Keen to attract and retain the best talent for your organization? When it comes to employee retention, paid time off is one of the key strategies that you should consider.

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    Motivating Employees with Paid Time Off Policy

    Employee Motivation Among the various strategies adopted by companies for employee retention such as paid time off (PTO) is one of the simpler and more effective plans. PTO can give an employer an edge over competitors that do not offer this plan to their employees. It is a thoughtful incentive that encourages a better work-life balance for the employees, provides them with more flexibility, and shows that the organization cares for the employees’ personal life. It results in an improved employee loyalty for the personnel who value such benefits that support a balance between work life and family responsibilities.

    Photo Credit: www.sxc.hu duchesssa

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    What is Paid Time Off (PTO)

    By definition, paid time off refers to any period of time for which an employee does not work but receives regular pay for it. Employers are aware of the intrinsic need of every employee to take a break from work after a continuous work period. This down time is essential for an employee to pay attention to his non-work related responsibilities, necessities such as sickness or caring for a family member, vacations with the family, or leave for other personal reasons. So, when considering employee retention, paid time off is a great idea.

    Some companies have PTO plans that allocate a specific number of days for different types of leave requirements. But some other employers offer a fixed number of paid holidays in the year, and the employee is given the discretion to use them for any reason. In terms of employee retention, paid time off serves a key purpose. Therefore, many companies are increasingly opting for PTO plans in order to achieve an edge of their competitors in terms of attracting and retaining top talent.

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    A Simpler Solution for Employee Time Off

    Paid time off is a relatively simpler voluntary plan compared to complex vacation plans that categorize employee leave into sick leave, personal leave, vacation time, and so on. The PTO plan usually bundles all the time-off benefits of an employee into a single package along with pay for those days. For instance, a company may have 7 days allocation for vacations, 4 days for sick leave, and 3 days for personal leave. This would necessitate more record keeping and at the same time, the employee would be forced to use the time-off for the designated purposes only. Against that, a PTO plan clubs all time-off days together and offers 14-day paid time off to the employee in the year which he may use for any reason. This creates a win-win situation for both parties.

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    Advantages to the Employers

    The key advantage to the employers with pro-employee policies such as PTO is a more loyal and motivated workforce. An employee with a superior work-life balance and a happy family life is likely to be more productive and enthusiastic at work. At the same time, employees may begin to value this benefit more than other monetary benefits offered by competitors. This helps to enhance employee retention for the organization as a whole.

    PTO plans also allow the employers to place strict conditions such as giving advance notice before taking time off. This ensures that the workflow of the company is not disturbed and productivity is not compromised. Therefore, PTO should not be viewed as something that will encourage employees to take unnecessary vacations, which they may not have taken if there was no pay for those days. It benefits outweigh the costs for most employers who are using this plan.

    Source: Author's own experience.