Nervous InterviewTraditionally, paid time off (PTO) included vacation days, holidays, sick days, and an occasional personal day, depending on the business and the number of employees. But many companies are finding that a paid time off bank-type system, where hours are deposited to be used as needed, is much more effective, and can cost less overall.

Understanding the full impact of a PTO bank-system is needed to help managers and human resource departments determine if such a system is better for their business than the more traditional method of accounting for time off.

According to a 2010 survey taken of WorldatWork (http://www.worldatwork.org) members, large corporations, especially those with thousands of employees, typically prefer the traditional PTO systems. Some industries, however, such as health-care organizations, primarily use bank-type systems to manage their PTO for employees. Because the traditional system often provides more PTO for employees, many companies may see the transition to bank-type PTO systems as a cost-savings initiative.

While the type of PTO leave varies, typical bank-type PTO management systems are used for vacation, sick time and personal days. Even the companies who use such systems typically provide PTO for jury duty and bereavement separately, not requiring such days to be used from the employee’s PTO account.

A growing number of businesses use the PTO banking system, nearly 40 percent, according to the WAW survey. Of those, the amount and type of PTO varies by company type and number of employees. In addition, the majority of the companies who use such systems for sick time and personal days still use a traditional PTO system for managing vacation time.

Employees in companies that use the PTO banking system typically most often accrue leave time gradually through the year rather than all at once. And all or some of the accrued time typically rolls over to the next year in those companies. For many, departing employees also receive a cash payment for PTO not used and many can donate their hours to another employee at will.

In regard to paid holidays, the WAW survey found that most companies provide nine paid holidays each year, whether they use the traditional PTO system or the bank-type PTO. Other PTO leave time, such as sabbaticals, are so rare as to be unaffected by the bank-type PTO system.

For many companies, the decision to move to a PTO banking system stems from the need to compete for better employee talent. Such businesses are often seen as more concerned with the amount and type of paid time off they provide as part of an overall benefits package than those who maintain the traditional system.

Determining whether a PTO banking system is better for your business is an individual choice that should only be made after careful consideration of all the factors involved. Hopefully, this data can guide you toward finding the solution that works best for your company and employee needs.