Employers know that their employees need a break once in a while. That's why companies offer paid time off (PTO) in the form of vacation days, holidays, personal leave, and sick leave. Some employers' plans offer a specific amount of days for each form of PTO, while others, particularly in the healthcare and financial industries, provide one set amount of paid days off that can be used for various reasons at the employee's discretion.

The definition of paid time off is any time not worked by an employee for which the regular rate, a fixed or a prorated amount of pay, is accrued and paid to the employee. Companies grant time off to give employees down time and a chance to deal with non-work related issues. Despite the high costs of paid time off, companies offer this employee-friendly benefit primarily to be competitive in attracting and retaining talented employees.

Paid Time Off Plans

As mentioned above, some employers prefer to give their employees a paid time off plan. This is a more flexible arrangement that gives the employee a set amount of days off to be used at the employee's discretion. These days can be used for sick time, personal days, vacations, or for whatever reason the employee may need time off. Like vacation and other forms of time off, the amount of days off generally accumulates through years of service and the level of the employee within the organization.

Average number of total paid days off in the United States Years of service

Source: Society for Human Resource Management, 2004 SHRM Benefits Survey.

Vacation time varies by years of service

Paid vacation time is a voluntary benefit that organizations offer to employees. There are no federal regulations requiring employers to provide vacation days, but it has become common business practice to do so.

Employees accrue hours of paid vacation time at a certain rate for each day worked. Different employers use different formulas to calculate vacation time. So, an employee with 15 days of paid vacation time at one company may or may not enjoy the same number of paid vacation days after changing jobs.

Generally speaking, the amount of paid vacation time depends on the length of service and the level in the organization. Usually companies have some scale that decides how many paid vacation days an employee will receive. Four or five weeks of vacation is not unlikely for an employee who remains with a company for more than 15 years, although that's typically the upper limit for vacation benefits in the United States.

Average number of vacation days in the United States

Source: Society for Human Resource Management, 2004 SHRM Benefits Survey.

Some employers base vacation days on the employment anniversary date, while others use the calendar year to keep track. Employees should always ask whenever there is doubt.

Exempt employees should receive the same salary pay rate for vacation days. So if you are exempt and take two weeks of paid vacation, you should receive a paycheck for the same amount of salary for those two weeks as if you had worked.

Some companies let employees carry unused vacation days over to the next calendar year. Policies differ, but typically employees may carry over five days. Not all companies pay cash for vacation days that are not taken by the end of the calendar year. If an employee leaves the company, it is required to compensate for those unused vacation days in cash. Some companies use a prorated payout that is in accordance with the number of months of accrued service in a given year.

Part-time employees are often granted some paid vacation days as well. However, the pay rate may be different from these employees' base pay rate.

Often HR managers are concerned about the effect of vacations on productivity, staffing, customer service, and operating continuity. Therefore, when you plan your vacation, you may need to notify managers and your HR department to get clearance. This is particularly important if you want to take time off during common holiday seasons, such as in August or at the end of the year. Early notification allows for advance planning to reduce the burden on your colleagues while you are away, and to minimize the backlog of work when you return. Remember that vacation time, like everything else, is negotiable. Just bear in mind that you might have to forego other forms of compensation in exchange for more vacation time.

Many U.S. employers recognize 10 federal holidays, if not more

Organizations commonly provide nine or ten days per year as public holidays, although there is no standard. Federal holidays, or legal public holidays, are recognized by Congress but are not observed by all employers.

Legal public holidays

• New Year's Day, January 1
• Martin Luther King, Jr. Day, the third Monday in January
• Washington's Birthday, the third Monday in February
• Memorial Day, the last Monday in May
• Independence Day, July 4
• Labor Day, the first Monday in September
• Columbus Day, the second Monday in October
• Veterans Day, November 11
• Thanksgiving Day, the fourth Thursday in November
• Christmas Day, December 25

Source: 5USC Sec. 6103.

In addition to federal holidays, some employers also observe state and local holidays. For example, many businesses in Massachusetts are closed on Patriots Day, the day of the Boston Marathon, especially those companies located along the marathon route. In the Chicago area, Pulaski Day is considered a holiday by many employers.

However, many companies reserve the right to schedule work hours during holidays. This is particularly true in organizations such as hospitals, law enforcement, and emergency agencies. Other special circumstances may prompt employers to keep their workers busy during holidays. Those scheduled to work on these days may be compensated at a premium. Many retail and food service organizations have found it profitable to remain open on holidays, although some may offer limited hours.

By law, employers cannot prevent an employee from observing a religious holiday if it is that employee's belief or practice. For example, if a Jewish employee wishes to observe Yom Kippur, the employer may not deny that employee's request even if Yom Kippur is not a company holiday, although the employer may deny a Christian employee's request to take off on Yom Kippur.

Usually, employers and employees make arrangements for the extra holidays. Typical arrangements may be to take the day off without pay; or, to take it as a floating holiday, a personal day, a vacation day, a sick day, or in substitution of another company holiday.

Your company should let you stay home to heal or move

Personal days are designed for employees to take time away from work for reasons unrelated to illness, including moving days and doctor appointments. Depending on the organization, personal days can be treated in conjunction with sick days or separately. Companies that offer paid personal days extend an average of one to four personal days per year. Normally, organizations have a "use it or lose it" policy on unused personal days.

In the Society for Human Resource Management's 2004 Benefits Survey, 86 percent of survey respondents offer some sort of paid sick leave to employees, either specified as sick days or in a paid time off plan. The average is 11 paid sick days per year. Of those who provide paid sick leave, 52 percent allow some portion of the unused sick days to be rolled over into the next year.

Special circumstances warrant additional time off

Many companies have policies on paid time off for special circumstances that are unexpected or unforeseeable. The three most typical circumstances include jury duty, military/reserve duty, and bereavement leave.

Jury duty. Most organizations allow employees to take paid time off if they are called for jury duty. The length of time granted varies depending on the jurisdiction and the case. It could take only a few hours, several days, or a week or longer.

Even though courts provide a small amount of compensation for jury service, companies customarily compensate employees at their regular base rate of pay.

If you are called for jury duty, your employer will likely require you to obtain verification that you have served from the court. If your jury is excused earlier than the close of business, your employer could require you to report to work.

Jury duty is considered a civic responsibility. In general, if your employer is reluctant to permit you to serve, it is a matter for the courts and the employer to resolve. Contact the clerk of the court where you were called to serve if your employer resists letting you carry out your civic duty.

Military duty. Employees who are members of the reserve forces or the National Guard are subject to weekend duty, annual training duty, or short-term emergency duty. Companies are generally not required to compensate employees for leaves due to military service, but must grant a maximum of 14 days a year for such duty. The employee is not required to use his or her vacation or paid time off for days required for service.

Bereavement leave. Companies may grant paid time off for employees bereaved by the death of an immediate family member or a close relative. SHRM's 2004 Benefits Survey shows that 90 percent of respondents offer paid bereavement leave. Usually, employees are allowed three days off with pay, and no pay for any additional time, unless employees arrange to use personal days or vacation time. Advanced notice for a bereavement leave is not required. Companies could have a narrowly defined list of people who are considered immediate family members.

- Jessica Yang, Salary.com contributor Modified 11-12-2004