Benefits and Compensation

Pros and Cons of Using a PTO Bank Instead of Vacation and Sick Time

Does your company have a set number of vacation days and a separate number of sick days that employees may take without losing pay? Or have you implemented a more catch-all system of paid time off (PTO), in which all vacation days, sick days, and personal days are lumped together?

There are pros and cons to using a PTO bank, and employers would be well-served to consider the ramifications before switching.

Benefits of Using a PTO Bank Instead of Separate Vacation and Sick Time

First, let’s take a look at some of the benefits to using a combined PTO bank rather than separate vacation and sick leave allotments:

  • Employees may see PTO as a benefit as long as it’s communicated well. It feels like an improvement over separate accruals because an employee can theoretically take more vacation time if he or she doesn’t get sick often.
  • Employees no longer have to make excuses (or lie) when they want to use a sick day but are not ill enough to see a doctor.
  • PTO can be touted as a benefit to assist in recruiting efforts.
  • PTO is often easier to administer up front, since there’s no question of which accrual the leave comes from. Simpler administration can mean cost savings as well as better consistency in leave tracking.
  • Employee burnout can be reduced if employees are encouraged to take their PTO days. (PTO systems often have accrual caps built in, which encourages employees to use their days.)
  • Employees who have PTO report feeling more empowered because they do not have to justify each day off; they can take their days as needed for their particular circumstances, allotting between vacation, sick days, and personal days as they see fit.

Potential Issues with Using a PTO Bank

While there are a lot of benefits of using a PTO system, there are drawbacks as well. Let’s take a look at a few:

  • Some employees may feel slighted when switching to a PTO system, especially if sick days weren’t monitored closely under the old system. They may feel they’re now being penalized by having sick days count against their days off. This can be problematic since PTO banks tend to be seen as vacation time—even though they’re meant to cover both vacation and sick time.
  • PTO is generally treated the same as vacation time under the law—if an organization is located in a jurisdiction where accrued vacation must be treated as wages upon termination, then the whole accrued PTO bank must be paid out as such. This could mean the company has a higher financial liability when terminating employees. (In systems with separate accruals for vacation and sick days, employers are usually only required to pay out accrued vacation, but not unused sick days.)
  • In practice, employees tend to view PTO like vacation days, which means they may take more time off than they would with separate systems. With separate vacation and sick days, often the sick days are left untaken if the employee does not fall ill. While extra days taken as vacation can benefit employees and employers alike, it can also mean more days must be covered by colleagues and the employer may need to modify work practices to accommodate this.
  • Conversely, employees may be reluctant to take PTO when they’re sick if they begin to view their PTO as entitled vacation days. This means that despite having PTO at their disposal, employees may be more likely to come to work feeling ill than they would with a separate sick day policy. The rationale here is that it feels like they’re being forced to lose vacation time when they take a day off for an illness—even though PTO is meant to cover both.

What does your business do? Do you use PTO? Vacation? Personal days? What has been your experience?


About Bridget Miller:

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.