Do Companies Have to Provide Paid Time Off?

Do Companies Have to Provide Paid Time Off?

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Introduction

As an international employer, you may have a wide network of on-premise employees and distributed remote workers based in different locations with varying needs for time off depending on their situation, culture, country of residence, and more.

Holidays, breaks, and time off are strictly regulated in many jurisdictions according to local laws, unique events, culture, and tax requirements. Paid time off (PTO) is not just about staying compliant but about keeping employees happy and offering a competitive benefit to retain talent. Understanding PTO is essential for companies to unlock a largely untapped perk to make paid breaks, holidays, and off time an opportunity for healthier employer-worker relations.

This guide is specifically designed to shed light on Paid time off (PTO) as a perk every international employer should use wisely to grow and build a strong company culture.

What is Paid Time Off (PTO)?

PTO is a statutory benefit that workers are entitled to in many countries to get paid when on leave for any given set of statutory leaves. This set of leaves may include the following:

  • Sickness leave
  • Maternity and paternity leave
  • Child care
  • Annual leave
  • Vacation/holiday
  • Personal days
  • And more

The kinds of leave a company offers depend on their benefits package, local laws, and more.

PTO's application — and meaning — has changed in recent years. Thanks to COVID-19, remote work has given rise to many companies offering unlimited PTO. As more workers demand flexibility, PTO has become an increasingly popular (yet not fully used) perk. Employees and contractors look for PTO as a benefit when joining a new employer, negotiating new work arrangements, or simply reevaluating work-life balance needs. This changing landscape of work-life balance has also created a demand for remote companies with unlimited PTO, such as Skuad, to manage for employers how PTO could be distributed to maximize returns on productivity without having an impact on workflow processes.

Employers are often obligated to provide a flexible PTO policy upon request from employees and contractors. The underlying rationale for having a PTO policy is about worker well-being and long-term productivity. Understandably, PTO is a benefit that workers have long fought for centuries to gain. PTO is essential for every worker's survival, well-being, and motivation.

If workers don't have time off, they'll quickly become burned out — which may affect their work quality and lead them to look for other jobs. This is where a PTO policy comes in. Having a PTO policy not only ensures you as an international employer stay compliant in a formalized and standardized way (more about PTO benefits in a moment) but also ensures you manage PTO in ways that attract and retain more skilled workers.

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Is PTO legally required in other countries?

Informed by local regulations and international practices, workers expect to receive PTO. Each country and organization provides for PTO, but it varies. The U.S. does not have a federal- (national) level PTO policy, and employers are left to decide how much organizations should give PTO to employees and contractors.

In contrast, the EU has a more generous PTO policy of 20 days minimum. Despite varying between individual EU countries, it still provides a national-level benchmark for PTO. The U.K., Spain, France, and Germany all have 24 days as a general PTO requirement for workers.

More and more are moving to a more flexible model. Some companies are offering unlimited PTO. Unsurprisingly, a shorter workweek is an emerging PT model where workers work less and produce more. This shift to less regulated PTO may make asking whether PTO should be legally required irrelevant.

As an international employer, you must stay abreast with PTO's changing regulations and practices. To do so, an employer of record services can make it easy to offer competitive PTO for remote employees.

Benefits of offering paid time off

The benefits of PTO apply across a wide range of aspects of a worker's physical, mental, and professional health.  

  • Physically: PTO helps workers regain lost physical strength, particularly in jobs requiring intense physical activity.
  • Mentally: PTO helps workers relax and decrease stress levels experienced at work, particularly in jobs requiring intensive mental activity.
  • Professionally: PTO helps workers reset and reconsider what was done right and what went wrong over a workweek or after a more extended vacation. In doing so, workers return to work not only recharged mentally but also with a more balanced perspective on work relations and performance.

PTO benefits beyond the immediate positive impacts on employees, contractors, and employers.

From a labor relations perspective, PTOs can be used to motivate and help workers feel at home by shifting control of holidays, vacations, and breaks away from employers. Like unlimited PTO, a PTO policy where employees and contractors choose when to take time off and how long is apt to engage employees and contractors more and establish a sense of ownership.

Moreover, PTOs controlled by employees and contractors is well aligned to a global pattern where HR policies are more worker-centric. Flexibility is much more important than money to more skilled employees and contractors. Having more flexibility to take PTO for personal, professional, and family purposes is a huge perk top talent takes note of — and you, as an international employer, are sure to reap what you sow.  

Legally required or not, PTO has incomparable benefits for your employees.

Why offering PTO builds company culture

Typical compensation and benefits are no longer enough to offer in the modern workspace. More and more workers, especially skilled ones, are looking for "winning perks" to make or break an employment deal. In addition to flexibility, workers are now looking for a sense of "us," binding them to a community. Feeling isolated at work — something many remote workers know all too well — is not only damaging at an individual level and organizationally. Removing workers from a "Collective Us" unplugs them and may create an acute sense of alienation, dissatisfaction, and depression.

In contrast, having all in using a proactive PTO is shown not only to boost morale but also to build a strong company culture. Organizational leaders — C-Suite, middle managers, etc. — are critical to building a healthy and strong company culture by supporting work-life balance programs, now more common in many companies. This can be achieved, for example, by encouraging employees and contractors to take time off without any fear of missing a possible promotion opportunity or having a negative impact on performance.

PTO is no longer negotiable. Today employees and contractors are looking for more freedoms at work beyond conventional, statutory PTOs required in local laws. As more and more companies shift to remote work, engagement becomes harder for employers. It requires more creative ways to engage, attract, and retain an ever-expanding local and global workforce.

As an international employer, you should do all you can to keep your workers engaged, primarily your remote contractors based elsewhere. You may not be included in the benefits or programs you provide for your on-premise employees. An employer of record can help offer this benefit to remote employees across the globe.

Conclusion

Understanding work-life balance and what your workers need is essential for your organizational culture and long-term growth. The benefits of PTO are already established and may even evolve as remote work becomes a dominant work pattern in the upcoming years. It would be best if you were prepared with a competitive PTO offering as an international employer.

Understanding PTO is the first step to engaging your employees and contractors and staying compliant, particularly in an out-of-jurisdiction market. This is not, however, enough and may even drive prospective skilled workers away if not done correctly. 

Partnering with an Employer of Record platform like Skuad enables organizations to hire compliantly, onboard employees, manage payroll, and provide competitive PTO packages. 

To know more about Skuad, book a demo today.

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