Paid time off (PTO)

What paid time off is, how a PTO bank differs from traditional leave, which types of PTO exist and how to manage PTO in your company

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Paid time off (PTO)

What is paid time off (PTO)?

Paid time off (PTO) is time away from work during which an employee keeps receiving their pay. PTO covers annual leave, paid sick days, public holidays and other paid days off.

Many companies, especially in the US, use PTO to mean a single bank of days that employees can use for holidays, illness or personal reasons. Elsewhere, paid leave is usually split by type, so PTO simply means all annual leave and other paid absences together.

Traditional leave vs PTO bank

	Traditional leave	PTO bank
How it works	separate allowances for holiday, sick days and personal days	one shared allowance for any reason
Flexibility	lower: days from one category cannot be used for another	higher: employees decide how to use their days
Tracking for HR	several balances	one balance
Where it is common	Europe, Latin America	US, international start-ups

A third model is unlimited PTO: the company sets no fixed number of days, but managers approve time off. It works only where there is trust and clear goals. Otherwise people take less time off and the risk of burnout grows.

Types of paid time off

Type	What it covers
Annual leave	planned holidays and rest
Paid sick leave	illness and medical appointments
Public holidays	national and regional days off
Parental leave	maternity, paternity, adoption and shared parental leave
Bereavement leave	the death of a family member
Floating holiday	a day off the employee chooses, for example for a personal or religious occasion
Sabbatical	extended leave, usually after several years of service

How to manage PTO

Write a clear policy. Leave types, number of days, accrual and carryover rules, and how far in advance requests are made.
Accrue days automatically. Monthly accrual in proportion to time worked removes most errors and disputes.
Approve requests in one place. Employees see their balance, managers see the team calendar, and HR sees the full picture.
Plan ahead. An annual leave plan prevents half the team being away at once. Read more in our article on leave management.
Watch unused days. Large balances are both a financial liability and a sign that people are not resting enough.

Paid time off in the UK

UK workers are entitled to 5.6 weeks of paid annual leave a year, which is 28 days for someone working five days a week. Employers can include the eight bank holidays in this allowance. Part-time workers get a pro rata entitlement, and workers with irregular hours or part-year contracts accrue holiday at 12.07% of hours worked for leave years starting on or after 1 April 2024.

Statutory Sick Pay, statutory maternity, paternity and shared parental pay are paid separately from holiday. Untaken statutory holiday must be paid out when someone leaves, and in most cases at least four weeks must be taken within the leave year rather than carried over.

PeopleForce automates PTO tracking in Core HR. In leave tracking, you create leave types and policies for different countries or employee groups, set up automatic accrual and carryover, approval chains and blackout periods. Employees request time off in a few clicks and see their balance, and approved leave appears in the HR calendar, in Google or Outlook calendars and in Slack, so everyone knows who is away.