How to create a PTO policy for global teams

The bigger the team, the more difficult it becomes to manage employee leave. In order to simplify leave management, a growing number of businesses are switching from separate leave policies for annual leave, sick leave, and more to a unified paid-time-off entitlement that bundles all the different types of leave into one policy.

When working with a global team however, managing employee leave based on an all-inclusive PTO policy quickly reaches its limits. How can businesses effectively manage PTO for their global teams? How to build an international PTO policy for distributed teams?

PTO is short for “paid time off”. Paid time off describes an employee’s entitlement to take time off work while still getting paid. It is often organized as an annual entitlement which can be defined in either days or weeks.

The abbreviation PTO is often used to describe a company policy where an employee’s entire paid leave entitlement is bundled into a predefined number of days. PTO is managed by each company individually, typically in the form of a formalized policy that defines leave entitlements, approval procedures, and more.

An employee’s annual leave falls into his or her PTO entitlement. However, PTO is not limited to the employee’s annual leave entitlement, but can also include other types of leave. For instance, businesses can choose to also cover the following leave entitlements in their PTO policy:

• Sick leave,

• Parental leave,

• Personal days off,

• Mental health days,

• Family care leave,

• Bereavement leave,

• Public holidays,

• And more.

Whether it makes sense to bundle different types of leave to create a single, all-inclusive PTO entitlement depends on what the statutory leave requirements are in the employee’s country of residence.

For example, in countries where maternity, paternity, and sick leave are statutory employee benefits, there is often no need to include these leave entitlements in the company’s PTO policy, since they are regulated by the country’s employment laws.

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A PTO policy describes how an organization manages its employees’ paid time off. It is an all-inclusive leave entitlement plan that combines different leave types that would otherwise be managed and allocated separately.

Typical elements of a PTO policy include:

• PTO entitlement in the form of a predetermined number of days (unless the company offers unlimited PTO),

• Description of the PTO system (frontloaded, accrued, or unlimited PTO),

• Eligibility criteria for employees to request PTO,

• Indication of whether it’s a “use it or lose it” PTO policy or an open PTO policy (in case, unused leave can be carried over into the next year),

• Description of the request and approval process,

• Details on when PTO payments are issued,

• Details on PTO payout upon termination, and

• References to specific employment laws that regulate statutory leave.

Developing a detailed PTO policy requires time and effort. Nevertheless, creating an individual PTO policy is a good call for businesses because it:

• Helps employees maintain a healthy work-life balance.

• Creates a deeper level of trust between employee and employer because employees are allowed to manage their leave entitlements autonomously.

• Increases employee workplace happiness.

• Fosters employee engagement, loyalty, and retention.

• Encourages employees to really take time off work.

• Enhances employee productivity and performance.

• Improves employee mental and physical wellbeing.

• Makes a great addition to a company’s benefits and compensation package.

Offering employees paid time off is beneficial for employee motivation, productivity, engagement, and loyalty. However, PTO policies have additional benefits unique to them—and also some drawbacks businesses should keep in mind.

Benefits of PTO policies for employees and employers:

• A PTO policy offers employees more flexibility.

• PTO simplifies leave management for the HR team because there is no need to track and record different types of leave.

• Creating a PTO policy can help reduce employee absenteeism by preventing false sick leave claims.

• Unlimited PTO policies are great incentives for attracting top talent.

Drawbacks of PTO policies for employers and employees:

• There is a higher likelihood of employees using all of their PTO.

• There is an increased risk of employees coming to work sick after having used up all of their PTO entitlement.

• Unclear PTO policies can create confusion among employees.

• PTO policies often count fewer days off than traditional leave policies.

• Unlimited PTO might lead to employees either not taking enough time off or abusing the unlimited paid time off offer.

Leave management based on an all-inclusive PTO policy might make life easier for HR teams at organizations that operate in one single country. For businesses with global teams, however, it’s a different story.

There are different factors that can make it difficult to manage PTO at an international organization. Challenges include:

• Differing work ethics and attitudes toward vacation between countries,

• Variation in the number and dates of public holidays between countries,

• Different cultural norms for paid time off,

• Negative repercussions on the sense of camaraderie at the organization because of conflicting interests and perceptions of appropriate leave entitlements, and

• Country-specific leave types and statutory leave requirements.

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Here are some PTO best practices for multinational organizations. 

• Set clear expectations: In order to avoid confusion or policy abuse, you should make sure that expectations are clear. Openly communicate leave entitlements to employees and encourage them to take leave to prevent burnout and subpar performance. At the same time, set clear rules on how PTO is supposed to be used.

• Create a global PTO compliance database: Compliantly managing PTO for global teams means adhering to country-specific regulations surrounding all the different types of leave employees are legally entitled to in their respective country of residence. To avoid compliance mishaps, businesses should keep an up-to-date knowledge base.

• Manage scheduled absences in a single system: Careful planning and good communication are crucial for successful PTO management in distributed teams. Team members need to know when their colleagues will be out of office. Also, HR needs to be able to have a synchronized view of who is out of office and when. This avoids having several team members from the same department being out of office at the same time.

• Work out a coverage plan: A coverage plan helps prevent disruptions and hold-ups in workflows and projects by determining who covers for team members during their scheduled absence. This is particularly important for global organizations where projects often involve a large number of employees, project managers, and stakeholders.

• Take a look at cultural differences: Just as any other global workforce management policy, a PTO policy for global teams must ensure that all employees are treated fairly and that nobody is put at a disadvantage. Before finalizing their PTO policy, multinational organizations should take a closer look at cultural differences between employees in different countries.

With these best practices in mind, organizations can develop an international PTO policy for their distributed teams. Here are a few tips to help you draft a robust policy that covers all the details and matches your business needs.

• Make compliance a priority: Many countries have statutory minimum requirements regarding annual leave, sick leave, and more. A global PTO policy needs to comply with the local regulations in all the countries where the business employs workers.

• Define a schedule for regularly reviewing the policy: Whether it’s the organization’s PTO or global talent acquisition strategy, policies should be updated and adjusted in regular intervals. Determine how often you want to review your global PTO policy and set reminders in your calendar.

• Set up PTO tracking and reporting: A generous PTO policy is a great incentive to attract and retain talent. To leverage all the potential benefits, businesses need to find a way to track PTO use across the organization and get detailed insights into patterns and trends which can be used to gradually optimize the policy.

• Get employee feedback: The best way to create a PTO policy for your global team that really meets the needs of both the team members and the organization is to get employee feedback.