How to Track Paid Time Off vs Unpaid Time Off

Have you met paid time off’s long-lost twin unpaid time off? Even though paid time off is the standard norm in most countries, unpaid time off is distinct from it. Unpaid time off is an approved absence from work that is not compensated by either the government or the employer. Unlike standard paid leave, this voluntary absence doesn’t exhaust an employee’s accrued paid leave balance.

In this blog post, we’ll be comparing paid time off and its counterpart, unpaid time off, in order to find the most efficient way to track it. We’ll explore the nuances that differentiate these two elementary categories in leave management. We’ll give you a few tips and tricks on how to better understand them and how to apply them to tracking time off.

These two concepts have never been equal because paid time off is ubiquitous, whereas its counterpart is somewhat ignored. But by introducing unpaid time off, we respect the needs of many employees who, in the absence of PTO, must choose UTO. Letting employees take this extra time off for various personal reasons significantly improves their satisfaction and well-being, and in that way, it has a huge impact on work-life balance.

Paid Time Off

Paid Time Off (PTO) is the privilege of employees to take time away from work and still receive their regular pay. It’s one of the essential benefits worldwide, and often the most desirable. It includes various types of absences, such as vacation, personal days, sick days, and holidays. Employees value PTO because it provides them with the flexibility to take care of personal and family responsibilities without sacrificing their income.

Employees in the United States receive an average of 15 PTO days per year, whereas their counterparts in Europe often enjoy more generous time-off benefits. Each country establishes its own legal minimum for vacation and sick days; for precise data, please visit our leave laws section. This resource can assist you in complying with your country’s leave laws concerning vacation days, sick days, maternity/paternity leave, bereavement leave, and more. For example, the US leave laws do not set a legal minimum requirement for PTO, while Canada requires a minimum of 10 days. Countries with the most favorable PTO policies are typically known for having the best maternity and paternity leave.

Pros of PTO for employees:

• Flexibility and work/life balance
• Rest and relaxation
• Improved health and morale

Pros of PTO for employers:

• Improved brand value
• Competitive advantage
• Employee retention

Unpaid Time Off

Sure, everybody knows what PTO is, but what about unpaid time off? Even its abbreviation, UTO (which sounds almost like UFO), is rarely used. How often do you hear it? If you didn’t consider yourself fortunate; unpaid time off is generally reserved for various unpleasant personal reasons: funerals, family emergencies, medical appointments, recovery from a longer illness, etc. Some other reasons might be jury duty, voting, volunteer work, relocation, maternity leave, and more. While most unpaid leaves are brief, some may be prolonged, especially if an employee is dealing with a serious injury or health issue.

Respecting UTO is especially important because it usually implies very stressful situations for the employee; significant declines in their own health or taking care of a close family member suffering from a severe illness. This is why it might be a valuable inclusion in your company’s leave policies.

Your policy for unpaid leave should clearly define details such as:

• Availability and eligibility
• The procedure for employees to follow when requesting leave
• Whether paid time off is also an option and a distinction
• Specifying which employees are entitled to both PTO and unpaid leave.
• If special rules apply to part-time, hourly, and salaried employees
• The maximum number of unpaid days an employee can take

Employers are usually not required by law to provide employees with any unpaid time off. But there are a few exceptions to this rule; they have to let employees take UTO: voting, military leave, jury duty, and FMLA. After any of these duties, an employee must be restored to the same position they previously held.

The way you run your payroll is the most important thing when your employees take unpaid time off. You’ll need to make three key adjustments: wages for the pay period (for the current pay cycle), taxes based on the total hours the employee worked, and the remaining UTO balance for the employee (if there’s a limit in place).

How to Track Paid Time Off vs Unpaid Time Off

Conclusion

We hope that our little research brought you a clear idea of how to track any kind of time off, whether that be paid or unpaid. If your company includes an unpaid time off policy in addition to regular PTO, understanding the distinctions is crucial. However, tracking and requesting time off should be simple, accessible, and transparent. A reliable PTO tracking tool can significantly improve how you manage your time off. Think twice and make the best decision for your company.