What Is PTO?
PTO policies typically provide a pool of paid days employees can use for various reasons. Employers use three main PTO strategies: accrual, lump-sum, or unlimited. PTO policies often include national and floating holidays, paid vacation days, paid family leave, and paid sick leave.
What Is Lump-Sum PTO
Lump-sum, or annual allotment, refers to a strategy whereby employees are given a set number of days per year. These days are provided in one lump sum and will either expire at the end of the year or roll over to the following year. The date for either the expiration or rollover will typically be the first of the year or the employee’s hire date.
Some employers may utilize a lump sum approach to supplement a compensation package. Once employees reach a milestone, companies will often boost the total number of PTO days available to the employee.
How Does Lump-Sum Differ from Accrual?
In contrast to a lump-sum approach, the accrual bank method spreads days out throughout the year. Rather than receiving a lump sum of days that can be rolled over or used within the year, employees will typically accrue PTO days quarterly or monthly.
There is no rollover policy as these days are accrued, not allotted yearly. It is normal for a positive limit to be in place. In other words, there is a maximum amount of days that can be spent. It is typically easier for employees to plan their vacations with lump-sum PTO plans. On the other hand, Accrual systems prevent employees from worrying about rollover, as they will continually accrue monthly or quarterly days.
Related Terms: Accrual Bank