Do companies have to offer paid time off?

We all need to take time off to prevent burnout and enjoy a break from the day-to-day routine. In fact, employees that take time off regularly are actually more productive. As a result, more and more companies are encouraging employees to use their time off and find a better work life balance. 

For employers, offering a generous paid time off policy can attract and retain top employees. Prioritizing employee satisfaction is important to reduce the high costs of turnover, which can cost companies 1.5-2 times an employee’s salary. 

In this article, you’ll learn about what paid time off includes, what the legal requirements are concerning it, and what benefits both employers and employees can expect from taking time off.

What is paid time off?

Paid time off, commonly referred to as PTO, includes paid holidays, vacation days, sick days, personal time, parental leave, and any other paid time off an employer offers as part of their benefits package. 

Many companies have shifted towards a general PTO policy, which provides the employee with flexibility to use their time off as needed. Previously, employers would differentiate between sick leave and vacation. Many employees prefer the general PTO option as it does not restrict how they can use their time off. Parents, for example, may need to take time off for childcare or parent teacher meetings—neither of which fall into the restrictive vacation or sick day categories.

Providing a generalized PTO policy also affords employees privacy to use their time off however they need to, without disclosing personal information to their employer. 

The standard amount of time employees take off each year and the amount of time off typically offered from employers varies by region and country. Local legislation dictates the number of paid days off that employers need to offer, and failure to meet these standards can quickly spell legal trouble and hinder recruitment efforts. 

Is paid time off legally required in other countries?

Whether or not paid time off is legally mandated varies by country. Each country has its own requirements for the number of days off employers must provide. 

European countries tend to offer the highest amount of paid time off. At minimum, employers are expected to provide 28 days off for standard, full-time employees upon hire. Member countries of the European Union are expected to provide at least four weeks of paid vacation. There are variations from country to country, with many offering more than the minimum amount. 

Some countries require that employees stay with the company for a certain period of time before becoming eligible for paid time off minimum requirements. For example, in Brazil and Australia, employees receive 30 days of paid time off after working for their employer for one year.

Paid time off in the United States

In the United States, there is no federal mandate for paid time off for holidays or vacation days. 

As a result, some employers may not offer any paid leave. In these situations, employees are forced to take unpaid leave for vacation or illness. Approximately 25% of the working population in the United States do not receive any paid time off.

The amount of paid time off greatly varies

Unfortunately, some populations are disproportionately impacted by the lack of paid time off. Low-income individuals, part-time employees, and small business workers are more likely to work in jobs that don’t offer any paid time off benefits. 

In the private sector, on average, employees receive 10 paid vacation days and six paid holidays. Relative to other countries, this is not a lot of time off. For many Americans, the amount of paid time off they receive is left to chance.

Industry standards and employee expectations also play an important role in informing companies of how much time off they should offer. 

Companies can make their own rules to limit how employees take time off

Without laws and legislation, companies are free to create restrictions around eligibility, accrual, timing, and rationale for requests. Individual employers can choose how much time off you can accrue and the rate at which it accrues. Discrimination laws prevent employers from withholding paid time off based on protected characteristics such as race, religion, or disability. 

“Use it or lose it” refers to an accrual policy that limits how much paid time off an employee can collect before they must use it or else forfeit it. This encourages employees to use their time off before it ‘expires’. However, this policy is not legal in all states. 

New employees may not immediately be eligible for paid time off. Some employers impose a waiting period during the first few months of employment, during which new employees are unable to request time off, even if they accrue it each paycheck. 

It is up to the individual employer to set expectations for how much notice employees must provide when requesting time off to help with scheduling. Some employers may restrict how much time you can take off at once or impose blackout dates when time off will not be approved. 

Benefits of offering paid time off

Both employees and employers can benefit from a robust paid time off program.

Promoting work-life balance that minimizes burnout

Taking paid time off promotes a healthy work-life balance and prevents employees from burning out. In the long run, this pays dividends for a company’s productivity. When employees feel like they can take time off without guilt or worrying about making money, they are more likely to stay on at their company. Companies benefit greatly from the increased retention and employee satisfaction.

Creating a safe and healthy work environment 

When employees get sick, oftentimes it is more beneficial for them to take the day off and get the rest they need to recover quickly. Everyone knows how hard it is to even send an email if your head is congested and you only slept for three hours the night before. Employees that don’t feel empowered to take leave when they are sick may try to work through the illness, prolonging their recovery time and performing poorly on work tasks during this period. 

In the case of hybrid or in-person work environments, it is especially important for employees to stay home if they are not feeling well to prevent spreading viruses and germs in the office. 

Colleagues may also get distracted by a sick coworker and the concern of getting sick themselves. Ultimately, having a robust paid time off policy will promote a safer work environment for everyone.

Ensuring privacy for employees

In some cases, the reason for taking time off may be highly personal. For example, individuals who struggle with anxiety may need to take a mental health day but would prefer to keep their mental health status private from their employer. Employees shouldn’t feel pressured to reveal their reason for absence to their manager.

Planning for employee absences

With a paid time off program, employees are more likely to feel comfortable scheduling their days off in advance—acting proactively to take the rest they need to perform at their best. This allows employers to anticipate changes in staffing and adjust schedules accordingly. 

Logistically, it is easier for HR employees to keep track of days off under a general paid time off structure, rather than having to manage different systems for sick vs. vacation days. 

Employers should shift their mindset away from the idea that time off does not directly benefit the work that employees do. Employees are more likely to be engaged and present when they know they can take a vacation day if needed. Employees without paid time off benefits are left to daydream about their beach escape while on the clock. Time away from work can also give employees a new perspective and promote creative problem solving.

Offering paid time off: A must for building a healthy company culture

Employers should be aware of local laws and regulations that govern how much paid time off is mandatory for each country that they hire in. Consider how different mandates in each country and region influence the company’s paid time off policy holistically. For example, while paid time off may not be legally required in the United States, it is only fair to offer American employees comparable leave to their counterparts in other countries with minimum requirements. 

Once you implement a paid time off policy, make sure employees feel encouraged and empowered to take the time off. Cultural differences around work can lead some to feel guilty about stepping away from the office out of concern for appearing lazy or unmotivated. 

The best way for employers to create a healthy culture of taking time off is by implementing a generous paid time off policy and leading by example, from the top down. A healthy work culture lets employees know that they are trusted to use their time off without abusing it. 

Looking for help with international hiring? Check out our global hiring guides to learn more about paid time off requirements in each country.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.