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Blog banner for blog Time off Policy for Small Business

Time off Policy for Small Business: 6 Types & 5 Steps to Write a PTO Policy

Small businesses, like large enterprises, are not legally required to offer employees paid time off (PTO) under federal law. While a few US states and cities have PTO rules, you must have a time off policy for your small business.

A time off policy is a set of rules and guidelines stating how employees can use their paid time off and what constitutes paid vacation. A time off policy for small businesses is a great way to attract the right talent and keep employees happy and satisfied.

A comprehensive paid time off policy for small businesses ensures a fair and consistent approach to granting PTO. It also ensures that your small business functions smoothly.

Here’s your guide to the time off policy for small businesses.

1. Vacation

Any time off granted to employees by small businesses for rest, relaxation, and personal pursuits is considered vacation time. The vacation policy for small business should include all details regarding accrual. Usually, vacation time off is earned based on the length of the employment.

The longer employees work for the business, the more vacation days they accumulate. It should also clearly detail how far in advance employees must request vacation days. It is essential to look for replacements or make shift changes.

For small businesses, certain peak seasons are often listed as blacked-out dates, and vacation on these dates is restricted. Also, mention how payment for the vacation days is calculated and if there are any other additional benefits.

2. Sick leave

Sick leave is provided to employees to cover urgent medical care, illness, or to take care of a sick family member. Small businesses’ paid time off policy should detail who is eligible for sick leaves – full-time or part-time employees, or both.

Provide clear information on whether the sick leave policy covers family members. Information regarding the accrual rate of sick leave and how it may be used should be included. Some small businesses ask for a doctor’s note for extended sick leave.

Sick leaves can be paid or unpaid, depending on your business policy and legal requirements. The policy should also specify if unused sick leave can be carried over to the next year and set limits if applicable.

3. Holidays

A holiday policy, also known as a holiday calendar, is the list of designated specific days on which the company is closed or provides additional compensation for employees working on holidays. It should include all holidays your small business observes, including national, religious, or industry-specific holidays.

Be specific about the eligibility for holiday PTO and the criteria for receiving holiday pay. If you offer holiday pay, clarify the rate of holiday pay. Also, include information about scheduling employees to work on holidays.

4. Accrual leave

The accrual policy is the most common type of PTO policy for small businesses. Accrual allows employees to accumulate their paid time off allowance throughout the year. It is beneficial for both, as small companies can manage the cost of PTO, and employees can take paid-offs throughout the year as they accrue more PTO.

The accrual policy should specify how much leave employees accrue per hour worked or per pay period. Any limit on the maximum accrual should be mentioned. This will encourage employees to use their leave regularly. If you allow carryover, inform employees of the policy.

5. Bereavement

Bereavement policy is about time off employees can ask for to grieve and attend to family matters after the death of a loved one.

The bereavement policy has to detail who is eligible for bereavement leave and the duration, for instance, 3 days for immediate family and 1 day for extended family: guidelines to apply for bereavement time off and documentation requirements such as death certificate or obituary notice. Mention if the employees are paid or not for time off for bereavement.

6. Jury Duty

Jury duty is the responsibility of every eligible US citizen, and businesses should facilitate employees to serve as jury members. Companies should have a jury duty policy to let employees know they can fulfill their civic duty by serving on a jury without fear of retaliation. Most small businesses include jury duty days in their paid time off policy.

However, they cap the number of days as the period of jury duty can be unpredictable. Tell employees about the compensation, whether they will receive their regular pay during jury duty or partial pay.

How to write a PTO policy for small business?

Now that we know what types of PTO policies that should be included in small businesses’ time off policy, let’s discuss how to create such a policy.

Step 1: Introduction

Start by outlining the information covered in the time off policy. We recommend you write the introduction part last, as once you have drafted all the policies to include in the PTO policy, it will be easier to write the introduction.

Explain the purpose of the PTO policy and its importance for both the business and employees. It is better to highlight how the paid time off policy aligns with the company’s values and culture. Remember to include the last revision date. 

Step 2: Scope

The policy’s scope section includes information about the types of policies and what the small business’s time off policy intends to achieve. Here’s an example:

This PTO policy is designed to provide guidelines and procedures for the accrual, use, and management of paid time off for eligible employees at [Your Company Name]. Our commitment is to support a healthy work-life balance for our employees while ensuring the smooth operation of our business.

State the eligibility for each type of PTO and the conditions under which employees can request time off. Outline the accrual rates (e.g., hours worked or pay periods) and the maximum accrual limits. Also, include information about how employees should request time off.

Step 3: Practicality

In this section, you explain the practical aspect of using the time off policy to request leave. Here, you should include the following:

  • What documentation is required for requesting PTO?
  • What type of paid time off policy is applicable in which scenario?
  • Whether PTO is paid or unpaid.
  • How is the PTO calculated?
  • Who will approve the PTO?
  • What happens if time off policies are not practiced?
  • It can explain whether additional benefits, like a vacation bonus, are provided and the process for handling unused PTO.

Step 4: Limitations

If the paid time off policy for small businesses allows accrual, then it is mandatory to set clear boundaries to avoid employees abusing the policy. Specify the maximum and minimum number of days for each type of PTO. Use a positive and concise tone to inform employees about the time off rules and how employees are paid for the time off.

Define how conflicts regarding PTO requests are resolved. You can include information on whether managers have the authority to deny or reschedule requests.

Step 5: Conclusion

In the final section of the time off policy for small businesses, summarize the policy’s main points and include points not covered in the above areas. Reiterate the importance of abiding by the PTO policy and how it aligns with the company’s values.

Provide contact information for employees to seek clarification or ask questions about the time off policy. Also, if your business offers any additional resources available to employees, such as HR personnel or company handbooks, mention them.

How does Truein helps handle the paid time off policy for small business?

Truein is a complete time and attendance management solution for small businesses. It is a value-for-money, cloud-based solution that integrates a robust set of workforce management tools. Truein’s leave management capabilities are excellent for managing paid time off (PTO) policies for small businesses.

Offering over 70 pre-made customizable policy templates, Truein allows businesses to manage multiple time off policies for employees based on their roles and employment. It precisely tracks employee PTO balances, ensuring that accruals, deductions, and usage are accurately recorded. 

You can customize the PTO policies to align with your needs and company culture. Whether your business follows a traditional vacation and sick leave system or has unique policies, Truein can be adapted to your requirements.

Using the Truein app on their smartphones, employees can use self-service features to request time off, view their PTO balances, and check policy guidelines. Learn more about Truein’s leave management capabilities here.

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A comprehensive time off policy for small businesses is crucial to avoid conflicts, ensure transparency, and facilitate smooth leave management. With Truein’s leave management capabilities, small businesses can provide and promote employee well-being and work-life balance and maintain operational efficiency.


1. Is PTO required by law?

No federal laws regarding PTO exist, but state and local laws may exist. Usually, paid time off is at the discretion of the employer. Still, small businesses need to understand the legal requirements in their jurisdiction and industry.

2. What are the benefits of a PTO policy?

With a comprehensive PTO policy, small businesses can bring structure and consistency in managing employee leave. This will reduce conflicts, enhance employee morale, improve employee retention, and help maintain business continuity.

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