PTO vs Vacation: What’s the Difference?
You listen to one person, they’re talking about taking their vacation time. Another’s talking about taking PTO. And you’re wondering… what’s the difference?
Vacation and PTO (paid time off) are often used interchangeably, though this usage is not always correct.
Keep reading and we’ll clear everything up, explaining everything you need to know about PTO vs vacation.
What’s the Difference Between PTO and Vacation?
The main difference between PTO and vacation is that PTO is a broad term for any time an employee takes time off from work and gets compensated for their time off.
Vacation time is just one form of PTO – there are many others, such as sick time and parental leave (assuming these leave types are paid in the business in question).
So, in essence, it boils down to this:
- All vacation is PTO
- Not all PTO is vacation
This is the standard way of looking at it – be aware that some businesses might use these terms in a different way, and in some cases (as we’ll explain a little later), the business might do away with vacation time and lump all forms of PTO together.
So is PTO the same as vacation?
Technically, there’s supposed to be a difference. Vacation is PTO, but PTO is not necessarily vacation.
However, in a lot of cases, PTO is used to mean vacation. If someone says “I’m taking PTO”, or “my new job gives me X days of PTO”, in a lot of cases they’re actually referring to vacation days.
But just know that the by-the-book definition of PTO includes other types of leave, and it’s more common to mistakenly think that PTO and vacation are the same.
Vacation time vs annual leave vs holiday time
So how about other terms that get thrown around, like annual leave and holiday time?
These are the same as vacation time.
Vacation is the standard term used in the US. Other areas of the world use different terms that essentially refer to the same thing.
Places like the UK, most European countries, Australia and New Zealand typically use the term annual leave, rather than vacation.
In some places, they’ll refer to this as “holiday”, “annual holiday” or “holiday time”, again meaning the same thing (though holiday may sometimes refer to public or national holidays, which are sometimes provided as a paid day off).
What can vacation days be used for?
Vacation days can typically be used for anything the employee wants.
The business may have certain rules the employee needs to follow when taking vacation time, as they’ll set out in their PTO policy. These rules might include the length of notice required when requesting vacation time, and who they need to send their request to, and how to format the request.
However, there are usually no rules for why someone takes vacation time. They don’t have to go to the beach, or out of the country, or go anywhere at all. It’s their benefit, earned as part of their job, and they can do with it what they wish.
Other types of PTO
Like vacation time, there are many other specific absences that may be classified as their own type of PTO. These include:
- Sick time
- Maternity/paternity/parental leave
- Bereavement leave
- Personal days
- Mental health days
- Voting leave
- Childcare leave
These are just a few examples – and they’re not always included under the banner of PTO.
Some businesses provide things like sick leave or parental leave, but as unpaid leave. If this is the case, it’s not a type of PTO (as PTO is, as the name suggests, paid time off).
Is it Mandatory to Separate Vacation from Other Types of PTO?
So we said that vacation is a subtype of PTO, and PTO is often used as a broad term, encompassing vacation time, sick leave and others.
But this is not always the case. There’s usually no legal requirement to separate your leave types this way (indeed the US doesn’t even require you to provide vacation time at all).
Some businesses choose not to offer vacation time as a separate leave type, and instead lump everything together in what is called a “PTO bank”.
The “PTO Bank” approach
The PTO bank is when all paid leave is included as one leave type, simply referred to as PTO.
That means the business doesn’t provide “vacation time”, “sick leave”, etc, but instead a bank of PTO that can be used for whatever reason the employee needs.
A traditional PTO policy might look like this:
- 15 days vacation time
- 10 days sick time
- 3 personal days
But a PTO bank would simply lump it all together as 28 days of PTO.
The same amount of time off is provided, but with no distinction between different uses.
If the employee needs 10 days of sick leave and 3 personal days, it might work out to be the same. But if they didn’t need their sick time or personal days, they could use this time for vacation instead.
This can be a more flexible, employee-friendly approach, though it’s important to ensure this is compliant with any relevant legislation wherever your company is located.
Key Considerations with PTO & Vacation Policies
Here are a few more things to consider regarding PTO and vacation time, and implementing paid time off (whether segmented or not) in your business.
Compliance with leave laws
It’s always essential that your PTO policy complies with any relevant labor laws in your location.
Federal Law in the US requires very little in the way of leave, particularly paid time off, though some states have their own requirements.
Though these laws typically don’t require you to segment your leave policy by leave type, they may have certain requirements you need to follow (such as minimum accrual rates, carryover policies).
Outside the US, leave laws are much broader still, and in many countries provide a lot more guidance than the law in the US.
Be sure to check thoroughly that your PTO policy follows the law, and get the help of a legal professional if you’re unsure of anything.
PTO payout and rollover
You may want to separate how payout and rollover/carryover works for PTO and vacation time.
Payout means what happens to unused leave when an employee leaves the company (e.g. is it paid out to them or not).
Carryover, or rollover, means what happens at the end of the year to unused leave – does it carry over to the next year, or expire?
There may be some laws you need to follow in regards to this, but otherwise, clearly state whether payout and/or rollover applies to all PTO, or just vacation (it tends to be more common that vacation time rolls over and is paid out upon separation, but not other types of PTO, such as sick time and personal leave).
Fairness and equality
Your PTO policy must be fairly applied across your company, and not discriminatory in any way.
This doesn’t mean you can’t make different PTO policies for different employees (for example, longer-tenured employees or certain roles may receive more PTO).
But it can’t be discriminatory based on protected groups. And keep in mind how your PTO policy will be perceived, and whether or not every person will feel it treats them fairly.
Crafting a clear and transparent PTO policy
However you choose to fit PTO into your company – whether it’s lumped together as one, or separated into distinct types, like vacation – you need a clear and transparent PTO policy that explains how it works.
It should be readily available to employees, and explain any rules regarding how PTO works in your business.
Read more about setting up a PTO policy here.
Tracking PTO & vacation time
It’s important to build an efficient system for managing PTO and/or vacation time.
You need to keep a running account of each person’s PTO/vacation balance, track their leave requests, and communicate any important information (such as key personnel going on leave) to relevant team members.
This is time-consuming when done manually, so it’s best to use an app that automates this work for you.
Check out Flamingo for one way to automate all the admin tasks related to PTO and vacation time (it’s free to try, and takes just a few minutes to set up).
Help employees achieve a positive work-life balance
While your PTO might be there to act as recruiting or retention incentive, or to ensure you comply with legal requirements, the ultimate goal of offering PTO is to help your team members maintain a positive balance between their work and personal life.
By maintaining a fulfilling personal life outside of work, they’ll be happier, healthier, and more productive at work.
You’ll also have less turnover, and a more positive company culture, which will contribute to better results for the business.
PTO works towards this goal. Never lose sight of the point of letting people take time off for vacation, or for sick leave, or for other reasons.
If you care about your employees, they’ll care about their work more, and it will set a positive foundation to help grow the business.