How Much PTO Should You Offer? It May Vary by Industry

February 6, 2019
How Much PTO Should You Offer? It May Vary by Industry
Paid time off is one of the most popular benefits a business can offer. Whether you’re a large employer or a small mom-and-pop shop, employees appreciate being valued with compensated days off. When it comes to how much time off you can offer on a paid basis, the number of days can vary greatly. But most agree, the more time off you can offer, the more competitive you can be in the marketplace. Determining how many how much time off you should offer can depend on a lot of factors, but it's good to start by examining the average vacation days by industry.

What’s the average?

According to the Bureau of Labor Statistics, on average American workers receive 10 days of paid time off per year, after they’ve completed one year of service. That time doesn’t include sick days and holidays. While the number goes up or down a bit, depending on industry and region, 10 is the national average. Generally considered vacation time, these days off typically increase as an employee’s service increases. For most companies, every five years an employee can earn an additional 3 to 4 days per year based on longevity. For most companies that let employees accrue additional time, there’s a cap on how much they can earn over the lifetime of employment.

Do employers have to give vacation time?

There is no federal requirement for employers to provide vacation time to their staff, but the benefit is wildly popular. According to research, vacation time is the second most requested benefit for small business. Number one is an employer-sponsored health care plan. In today’s tight applicant market, vacation time is a benefit many businesses, large and small, must offer to maintain staffing levels. There are also different state and local laws. For instance, in almost half the states, employee vacation time is an earned benefit: meaning if they leave the company for any reason, they must be paid for any time they’ve earned that was unused. Make sure you always check your local regulations before crafting your PTO policy.

PTO versus Vacation Pay

It’s important to understand the distinction between PTO and vacation pay. PTO or paid time off is the overarching category that refers to any time an employee is paid when they aren’t working. It can include holiday pay, sick time, pregnancy or parental leave (if a company pays for it) personal time or vacation time. Holidays, for example, are not considered earned (or accrued). If an employee starts their new job on December 21st, you’re probably going to give them the day off on the 25th, even though they’ve only been working for 3 days. This non-earned paid time off is not accrued, it’s awarded. As such, there is no requirement for business to pay it out if an employee separates.

Which Industries give the most vacation days in the US?

According to one study, workers who are looking for the most vacation time off per year should move into the non-profit/foundation sector. They top the list with an average of 17.5 paid vacation days per year. Government and military employees rank second at 17.3. The lowest ranking sectors were marketing/market research and public relations with no days off per year

Why is vacation time such an important benefit?

In addition to being one of the most requested benefits a company can offer, vacation time is good for employees and business. It’s unfortunate that over 700 million vacation days go unused by employees every year, and another 200 million plus are actually forfeited by staffers. Often employees fear using earned vacation time will make them seem less dedicated to their employer. Some worry about the consequences of leaving their workload undone, while others express guilt at having others cover their share. For most workers, their company doesn’t encourage staff members to use their earned time, sending a mixed message: we’re giving you this time off, but not telling you to use it. That can be stressful when it comes time to consider taking time off or letting it go to waste. Providing vacation time, and encouraging employees to use it, is believed to promote a healthier workplace. Giving staff members a bit of time to refuel is a great hedge against burnout. But there are other benefits as well. Surveys indicate people who work for a company that encourages vacation use are happier than those whose company is silent or ambivalent about taking time off. Another study revealed 72% of managers believe it’s easier to ask staff members to put in extra time when needed, if they are encouraged to take time off. A majority of those managers believe employees return from vacation with better focus and creativity.

How to Create a Vacation Policy

Creating a PTO plan can be challenging, but if you’re having difficulty acquiring or retaining talent because you don’t have one, it’s a challenge you’ll need to meet head-on. Companies must decide how much time off they can afford to provide: industry baselines offer some starting off points.  When considering vacation paid time off, you’ll need to determine how much you can afford to offer; how it will be accrued; and when, if any, blackout days may apply. Some companies offer a block of time accrued after the first year of employment. Others let staff members accrue time on a monthly or bi-annual basis. For some businesses, particularly in retail or hospitality, busy days of the year, like Black Friday, may prompt the company to blackout those days from PTO use. However you develop your policy, it’s important to communicate it to staff members and encourage them to use the time they’ve earned.

Finding balance

When considering or developing a vacation policy, it’s important to align your business needs with the needs and wants of your workforce. That can help create a policy that works well for everyone. And it’s worth considering: in today’s tight applicant market, those few days off could put you ahead of the competition when vying for top talent.

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