An increasing number of Canadian employers are converting their vacation policies, sick/ medical leave policies and personal leave policies into one paid time off ("PTO") policy. PTO policies gained great popularity in American workplaces over the past decade and Canadian employers are now starting to recognize the benefits of such policies, or are switching to bring themselves into line with American affiliates or in anticipation of acquisition by an American company.

Purpose:

PTO policies combine most, if not all, employer paid leave policies into one policy. The total number of paid days off are often referred to as "banks". PTO accumulates in the bank in whatever manner the policy provides for and employees can access the PTO for any purpose that they choose.

PTO policies can minimize company costs (by reducing the overall potential days off that an employee has access to), ensure that policies are implemented fairly and consistently with all employees (inconsistent management treatment and recording of time off for illness and personal days is reported as a problem across all types of employers) and gives employees autonomy and control over their personal needs.

Aspects of PTO Policies

PTO policies allow employees greater flexibility in managing their time off: employees are generally not required to provide any reason when accessing time in their PTO bank and only have to comply with the particular PTO policy.

A policy might specify that time can be taken in increments as small as quarter days, allowing an employee to attend to family needs, medical appointments, social engagements, etc. without having to provide details of their absence.

The policy should specify: how time accrues in the PTO bank; under what terms time is accessed; whether time can be "borrowed" and used before it is earned; what happens annually to unused time; and what happens to time upon termination of the employment relationship. Some plans allow for "donations" of unused PTO time to other employees or conversion of unused PTO time to other benefits.

Not only do employees tend to feel empowered by a PTO policy, employers find that it is a fairer to manage time off for employees. Employers can experience cost savings and find efficiencies by converting to a PTO policy. For example, an employer vacation policy which grants employees 15 days of paid vacation annually and an employer sick leave policy which grants employees 10 days of sick leave annually (on a "use it or lose it basis"), can be combined into a PTO policy which gives employees 20 days of PTO to use for any reason.

Transition to a PTO Policy

Before implementing a PTO policy, an employer should assess their current leave programs and determine where inefficiencies exist. The employer must also assess how outside programs such as short term and long term disability insurance will interact with a new policy. The employer then needs to determine what forms of leave will be included in the PTO policy.

The employer then needs to draft a clear, written policy that anticipates both the application of the new policy and the transition to that new policy (i.e. what will happen to any existing leave which has accumulated). It is also important to ensure that the appropriate systems are in place to track the accumulation and use of PTO time.

Finally, prior to any implementation it must be determined that the new policy will comply with the applicable legal requirements and the appropriate amount of notice of the policy implementation must be determined.

By Megan Cornell

To contact Megan, call 613 566-2838 or email

mcornell@perlaw.ca