The Ultimate PTO Glossary: A Complete Guide to Employee Leave
Navigating the landscape of Paid Time Off (PTO) can be a daunting task, with a myriad of terms and conditions. To assist you in this journey, we have compiled the ultimate PTO Glossary, simplifying everything from Absence Management to Vacation Pay.
Paid Time Off (PTO): The designated period during which an employee takes time away from work and still receives their regular pay. It’s used for various purposes such as vacation, personal time, bereavement leave, public holidays, or illness. The amount of PTO an employee receives is determined by the company’s policy and may be influenced by length of service, job position, and local labor laws.
Vacation (US) – aka Holiday Leave (UK), or Annual Leave: This term refers to a designated period of time during which an employee is granted paid time off from work for leisure, rest, and personal activities.
Eligibility: The criteria or requirements that employees must meet to be eligible for PTO benefits, such as tenure, employment status, or hours worked.
Accrual and Allotment
Accrual: The process of gradually earning or accumulating paid time off based on specified criteria, such as years of service or hours worked.
Accrual Frequency: The rates at which an employee earns PTO, usually calculated per pay period. The most common frequencies to calculate PTO accruals: hourly, daily, weekly, biweekly, semimonthly, and monthly. For example, an employee could earn 1 hour of PTO for every 30 hours worked.
Annual Allotment (or Lump Sum): A predetermined amount of paid time off that employees receive at the beginning of each calendar year or fiscal year, typically without any accrual process.
Frontloading: Allocating the entire yearly allotment of paid time off at the beginning of the year. Most jurisdictions in the U.S. allow frontloading but some don’t (for example, for certain types of leave, such as sick leave).
Max Accrual Cap: The maximum limit or threshold on the accumulation of paid leave hours that an employee can accrue within a specific timeframe.
Types of PTO Policies: The 3 most common types of policies regarding tracking PTO are annual allotment (or lump sum), accruals, and unlimited PTO.
Seniority-Based PTO (or Seniority Accrual): A policy where the amount of paid time off (PTO) that an employee is allotted or accrues increases with the length of their service or “seniority” within the company. Essentially, the longer an employee works for a company, the more PTO they earn per period. For example, a company might have a policy where employees accrue 10 days of PTO per year for their first two years of service, 15 days per year for their third and fourth years of service, and 20 days per year for their fifth year of service and beyond.
PTO Bank: A system where all types of time off (sick days, vacation, personal days) are combined into a single pool that employees can use as needed.
PTO Pro-ration (Prorated Balance): The calculation method used to determine the amount of PTO an employee is entitled to receive based on their start date, part-time status, or other factors that affect their annual leave or accrual rate. For instance, if employees are entitled to 20 vacation days per year and a new employee is hired on June 1st, the prorated balance can be utilized to calculate a proportionate percentage of their annual entitlement for the remaining duration of the year (7 months). So, 20/12 x 7 = 11,67 days.
Unlimited PTO: Unlimited PTO is a leave policy that grants employees the flexibility to take as much time off as they desire, with the understanding that they must fulfill their work responsibilities.
Management and Tracking
Absence Management: The utilization of tools and solutions to track employee absences, organize work, and maintain productivity.
Leave Management System (PTO Tracking System): Software used by organizations to accurately record, track, and manage employees’ PTO accrual, usage, and balances.
Bereavement Leave (also called Funeral Leave): Time off following the passing of a close relative or loved one, usually lasting from 3 – 5 paid days. This allows employees to mourn the loss, participate in funeral services, and attend to necessary post-death arrangements.
Compassionate Leave: Leave granted to employees to allow them to take time away from work due to the death or serious illness of a family member, relative, or loved one. It is intended to provide employees with the opportunity to grieve, attend funerals or memorial services, and handle necessary arrangements or support for their families during difficult times.
Floating Holidays: Additional paid days off that employees can use at their discretion, typically separate from standard vacation or personal days.
Furlough: A temporary and mandatory unpaid leave or reduction in working hours imposed by an employer, during which employees are retained by the company but are not actively working and do not receive their regular wages. It is typically implemented during times of economic hardship, business downturns, or unforeseen circumstances that require cost-saving measures.
Leave Types: The most common types of leave include vacation, sick leave, compassionate leave, maternity/paternity leave, parental leave, adoption leave, bereavement leave, jury duty leave, military leave, voting leave, furlough, sabbatical leave, and public holiday.
Mental Health Day: Paid time off specifically meant for mental health rest and recovery.
Sabbatical Leave: A period during which an employee temporarily stops their regular job responsibilities while remaining employed by the same company. During a sabbatical, employees may pursue activities such as research, travel, further education, or personal projects while maintaining job security and benefits. Sabbatical leave can vary in duration, ranging from a few weeks to several months or even a year, depending on the company’s policy and agreement between the employer and employee.
Statutory Holidays (also called Bank Holidays in the U.K.): Public holidays when employees may be given paid time off. Employers in the U.S. should consider both federal and state holidays.
Time Off in Lieu – TOIL (also called Compensatory/Comp Time): The practice where employers offer employees additional paid time off instead of money for working above and beyond regular working hours (whether it is overtime, night shift, or working on holidays).
Carry-over (also called Rollover, or Brought Forward): Allowing employees to transfer unused PTO from one year to the next, preserving their accrued time off.
Carryover Limit: The maximum number of unused PTO hours that employees are allowed to carry forward from one year to the next. That carryover is usually 40 hours of leave in the U.S.
PTO Policy: The set of rules, guidelines, and procedures established by an organization regarding the accrual, usage, and management of paid time off.
Time Frames of PTO: There are 3 general time frames for tracking PTO: the calendar year, the company’s fiscal year, and an employee’s hire date.
Absenteeism: Habitual and unauthorized absence from work without appropriate cause. This pattern is typically indicative of an intentional disregard for job responsibilities, and it can result in decreased productivity and a disruptive work environment.
AWOL (Absent WithOut Leave): An unapproved absence from work, where an employee does not show up for work without having requested and received permission for time off. This absence is unsanctioned and unexcused, and it implies a neglect of professional duties.
Blackout Period: A specific period during which employees are not allowed to take PTO due to high demand, critical business operations, special events, or other predetermined reasons.
Intermittent Leave: Type of leave taken by an employee in a non-continuous or sporadic manner, in separate blocks of time over a period, rather than in one continuous block of time.
Multi-Level Approval Process: A system where more than one person or level of authority is involved in approving a request for Paid Time Off (PTO). This process is often used in organizations with a hierarchical structure, where multiple layers of management exist.
PTO Audit: A process in which an organization reviews its PTO policies, records, and practices to ensure compliance, accuracy, and consistency. The purpose of conducting a PTO audit is to verify that employees’ accrued time off, such as vacation days, sick leave, and personal days, are accurately tracked, accounted for, and managed in accordance with company policies, labor laws, and regulations.
Presenteeism: Presenteeism is the act of attending work while sick or the practice of staying at work beyond the required time. It often stems from a fear that management may develop a negative impression if the employee takes time off. This can lead to burnout, hinder work-life balance, and negatively impact employee health and productivity. It is the opposite of absenteeism.
Probationary Period: The majority of companies have policies in place that permit new hires to begin earning paid time off (PTO) only after an initial probationary period, often lasting around three months.
Unpaid Time Off (Leave Without Pay): The absence of an employee from work that isn’t paid by the employer; used when they don’t have PTO available. It can vary in duration, depending on the reason for leave, and the guidelines set by the company. Employees may opt for unpaid time off to accommodate various circumstances, including holidays, attending funerals, illness, recovery from disease, medical exams, etc.
Pay and Benefits
Fringe Benefits: Various long-term incentives or non-monetary rewards provided by an employer to employees, beyond basic salary. Examples of fringe benefits are health insurance, retirement plans, family and medical leave, paid vacation, etc.
Holiday Pay: An employee’s regular wage paid during their time off on a public or statutory holiday, such as Labor Day, Independence Day, or Christmas. In the US, a prevalent concept related to holiday pay is the practice of employers offering “time and a half” or 150 percent of regular hourly wages to employees who work on holidays.
Job Protection: The obligation of an employer to permit an employee who goes on paid or unpaid leave to be reinstated to their former position upon their return.
Vacation Pay: The amount of money that an employee earns to be paid during their vacation time. The calculation can vary depending on company policy and local labor laws.
Sick Pay: The pay an employee receives when they are unable to work due to illness.
Double Time: A rate of pay that is twice the employee’s regular wage, often used for working on holidays or over a certain number of hours in a week.
Overtime Pay: Additional pay that an employee receives for hours worked in more than a set number in a work week.
Payout Upon Separation (also called PTO Payout or PTO Cash Out): Compensating employees for their unused PTO upon termination, retirement, or at the end of a specific period, in accordance with company policy or applicable laws. Leave laws for each country (and also each state in the U.S., and province in Canada) generally specify whether earned, unused PTO must be paid out to employees when they leave the job.
Premium Pay: Additional or higher compensation granted to an employee for various reasons, such as working overtime, performing work on holidays or weekends, working in hazardous conditions, or fulfilling specific job requirements.
Legal and Regulatory Terms
Compliance: The adherence and alignment of the policy with evolving laws and regulations. It involves ensuring that the company’s leave policies consistently meet the requirements imposed by changing legal frameworks.
Fiscal Year Start/End Date: Refers to the specific 12-month period designated for financial planning and reporting. For example, beginning Sept. 1 and ending Aug. 31.
Employment and Labor Laws in the U.S.
Family and Medical Leave Act (FMLA): A U.S. federal law that provides employees with up to 12 weeks of unpaid, job-protected leave per year for specific family and medical reasons, and also requires that their group health benefits be maintained during the leave.
Short-Term Disability: An insurance policy that replaces a portion of an employee’s income for a short period of time if they are unable to work due to injury or illness.
Long-Term Disability: An insurance policy that provides income replacement for workers who become disabled for a longer period of time.
Workers’ Compensation: A form of insurance providing wage replacement and medical benefits to employees injured in the course of employment.
The Americans with Disabilities Act (ADA): A law requiring employers to provide reasonable accommodations for employees with disabilities, which can include time off.
The Uniformed Services Employment and Reemployment Rights Act (USERRA): A law protecting the employment rights of individuals who voluntarily or involuntarily leave employment positions to undertake military service.
The Pregnancy Discrimination Act (PDA): A law that states that discrimination on the basis of pregnancy, childbirth, or related medical conditions constitutes unlawful sex discrimination.
Understanding these terms and how they relate to your company’s specific policies is essential to effectively manage and utilize your PTO. This glossary is a helpful tool, but always consult your employer’s policy or HR department for clarification.