Paid Time-Off and Vacation: What is the Difference?

Portia Neequaye

Portia Neequaye

6 min read


Paid Time-Off and Vacation: What is the Difference?

Some employees’ perception of paid time off varies depending on the company’s policy and work ethics. Employees tend to use the term paid time off and vacation interchangeably. However, they are not the same. In this article, we will explain the advantages and disadvantages of each, and also what to choose as an employee of a company.

What is Paid Time-Off? 

Paid Time-Off (PTO) is an all-inclusive package that gives employees a particular number of days within a year to use as a vacation period, sick leave, or personal time. To put it simply – an employee gets paid even while away from work.

There are no federal laws governing leave policies but there may be various sets of laws in this regard in each of the different states.  Most states leave it for the employer to decide how they will work with either PTO or Vacation.

As an employer, you know your employees need and deserve some time off.

Benefits and Setbacks of Paid Time-Off 

PTO Benefits 

  • Employees schedule time away from the office in advance, usually, three days ahead or a week, depending on company policy.
  • Most workers are likely to use their days off. There are a few rare cases where some employees do not use their days at all.
  • Unless the country or state mandates that companies have to pay employees who leave the company with unused days, employers control the policy for these payouts.
  • Employers do not need to monitor time away from work and employees must be truthful to create a healthy work relationship.
  • PTO plans are flexible and guarantee privacy (it is not necessary to state your reason for the time-off). Everyone has equal hours and rollover hours apply.

Just like everything has advantages and disadvantages, cause and effect, PTO has its downsides which you need to know about.

PTO Setbacks 

  • Most employees view PTO as vacation time and still go work while sick instead of using these days as sick days to rest and get better.
  • Employees get dissatisfied if days accumulate since it makes it hard to get time off at the beginning of the year.
  • Some employees hoard their leave days for several months or years and then take it all at once, leaving their work post vacant and expecting the company to fill the gap.

What is Vacation? 

Vacation generally means paid-time-off that can be taken without a condition. This does not mean employees can take time off as and when they want it, it is usually done through a process. Employers usually insist on a reasonable excuse by employees before a holiday can be approved. The timeframe for taking a break needs to fit with the company schedule.

Time away from the office helps you relax and recharge.

There are companies that have time-off policies, yet give employees vacation days to be used for illness or emergencies. It’s better to choose wisely by reading through your company policy if you have to decide between the two.

Make sure you understand, for example:

  • How to request time off as an employee
  • What happens to your paid-time-off when you leave the company without using the days
  • How many days may be taken in one go
  • How many days in advance must you request time off

With RemoteTeam you can easily create customized time-off policies and assign them to your employees. You can discover all the features of time-off here.Advantages of a Vacation 

The main advantage of having a vacation is to gain improved physical and mental health, greater well-being, decreased burnout, and to boost happiness.

Disadvantages of vacation and sick-time policy 

  • You need to consider the reason for time-offs before approving them
  • Employees might use sick leave for other reasons aside from illness
  • Your company might have to maintain two accounting systems; one for sick-leave and another for vacation.

The difference between Vacation and Paid Time-Off 

PTO covers any paid time away from work; whereas, vacation time refers to paid time off that’s taken for the employee to take a break. This is usually done on approval in advance.

Lady relaxing


Paid Time-Off plans and vacation time/sick-leave policies have advantages and disadvantages. Before you make a choice for your organization you need to know that vacation and PTO are not the same. Compare and contrast to see what will work best for your employees and the company in general.

Related Reading

How to Manage Time-Off for Remote Teams

Time-Off Policy Types & Examples From Remote Companies

10 companies offering unlimited PTO

Portia Neequaye
Written by Portia Neequaye

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