Paid Time Off, My Favorite Benefit

My Dad worked on the assembly line for General Motors in Michigan when I was growing up. Every summer, GM would bring the assembly line to a crashing halt for a week or two so they could complete the annual model changeover. This is still known as the “summer shutdown“. They would basically re-tool the assembly line for the next model year and pay the line workers to stay home. I will always remember coming home from school and my Dad would be sitting in the sun in the backyard drinking a beer while loudly bragging to the entire family:

“I’m getting paid right now”

Paid? But he wasn’t even working? This was one of Max’s early introductions to the concept of paid time off.

In my mind, paid time off lands smack dab in the middle of the intersection of healthcare and personal finance. It should build a house there. Time away from work is healthy. It can help us unplug and recharge when conferences don’t do the trick. But having money to fund that time away from work is also necessary. It’s really at the heart of why people want to become financially independent in the first place.

Here we are at yet another convenient junction here at Max Out of Pocket. 

Paid Time Off (PTO)

In my field, we don’t shut down every summer. Things keep right on trucking and there is always work to be done. But we do get vacation time. Since the beginning of my career, it always seemed like I have had more than enough time for vacations. For someone who values their time as much as I do, this has always been a good problem to have.

Max “getting paid” while in Las Vegas checking out a Corvette at Exotics Racing. My Dad didn’t build this one. These are built down in Kentucky.

Vacation time and PTO are often used interchangeably. The healthcare world I have chosen to spend my professional career in often refers to vacation time as PTO (paid time off). Employees are usually given a set amount of PTO each year as a benefit in exchange for working at an employer.

Before accepting a job offer, PTO has always been one of my favorite parts of a benefits package to review when sifting through the HR paperwork.

Accumulating Paid Time Off

In my experience, PTO hours are generally accumulated each pay period and deposited into a “PTO bank”. Fancy finance people like me call this an “accrual”. This hour balance in the bank grows until the hours are used. Generally, employees can look up their total PTO hours anytime through an online payroll system or view them directly on their bi-weekly pay stub.

For example, I am currently accumulating 9.85 hours of PTO per pay period. Since I get paid every two weeks, I am adding more than one day off to my PTO bank every pay period. So, over the course of the year, I will accumulate approximately 256 hours of paid time off.

9.85 per pay-period X 26 pay-periods = 256 hours

This comes out to 32 days off per year.

256 hours / 8 hours per work-day = 32 days off per year

Which is equivalent to 6.4 weeks of paid time off per year.

32 days / 5 days per work-week = 6.4 weeks off

If I got hired into my company today, my PTO bank would be at 0.00 hours until the first pay period. At that point, I would have 9.85 hours in my bank. In my experience, most employers have a 90-day probationary period for employees who are hired. Generally, they discourage or straight up don’t allow the use of PTO during this time period. This gives the employee the chance to grow the balance in their bank and the employer a chance to fully test-drive the employee for 90 days without interruption.

Remember, things may be different depending on the employer. Most of my career has been spent working for two separate large health systems. My brother, who works in automotive, gets a lump sum at the beginning of the year.

Putting Value On Paid Time Off

I usually assign an annual value to my paid time off when evaluating a compensation package. With some quick multiplication, this is generally an easy calculation. PTO is usually indexed directly to the employee’s hourly wage. So, if I am a nurse in Michigan making $35/hour while accumulating 256 hours per year, some simple math will kick out exactly how much my annual PTO benefit is worth.

$35 per hour X 256 hours = $8,960 annual benefit

This is exactly how much money your company or health system is shelling out each year to cover your PTO in exchange for your work you complete for them. That makes my medical insurance policy valued at $21,504 look like a pretty solid benefit.

Max “getting paid” to hang out above the clouds in Ecuador? Priceless.

Accrual Max

Most companies will put a cap on how much PTO an employee can have in their bank. That’s because to them, PTO is technically a debt they owe to you. Finance people like Max might refer to it as a liability. As employee wages grow through cost of living adjustments (COLA) and promotions, that PTO liability grows as well. But they also want to see their employees take time off.

For the health systems I have worked with, this PTO “cap” puts the employee in a “use it or lose it” scenario when they reach it. In other words, PTO stops accumulating when you hit the cap.

My current cap is 281 hours. This comes out to about 7 weeks vacation. I have been with my current employer for a few years now. Although I have slowed things down the last 18 months or so, for the first few years I had project after project lined up to where I had almost no time for a vacation. So, at the time of writing this, I have 260 hours of PTO. Clearly, I am quickly approaching my cap.

Here is a pretty nice summary of my PTO benefit.

With the 2020 pandemic, my company has briefly lifted the cap so healthcare workers are not disincentivized to work during this time of need. This was a pretty solid move if you ask me. That said, if I worked in Human Resources, I probably would have only included front line workers in this policy change, not bean counters like me. But then again, having a blanket policy was probably the path of least resistance in this case and saved HR from having to actually define what a front line worker is. Needless to say, I currently have some time before I need to worry about the 281-hour cap.

Using Paid Time Off

Remember, every employer is different here. For the health systems I have worked for, my PTO bank/accrual covers the ten federal holidays (with the exception of Columbus Day), sick days, and my traditional vacation days. This makes paid time off something we need to carefully manage.

These are the holidays my current employer covers.

  • New Year’s Day
  • Martin Luther King Jr. Day
  • Presidents’ Day
  • Memorial Day
  • Independence Day
  • Labor Day
  • Veterans Day
  • Thanksgiving Day
  • Day After Thanksgiving Day (I think this was a substitute for Columbus Day)
  • Christmas Day

This represents about 80 hours of my PTO. Assuming I take all these days off, I am left with about 176 hours for sick time and traditional vacation.

256 annual PTO hours – 80 hours for holidays = 176 hours for sick and vacation time

176 hours / 8 hours = 22 days for sick and vacation time

22 days / 5 day work weeks = 4.4 work weeks off for sick and vacation time

For Max, this comes out to 4.4 weeks of vacation since I literally never get sick enough to stay home. Pretty generous if you ask me.

Max “getting paid” while visiting Scotland

One of the perks of working for health systems is, at least as a salaried employee, I have always had some flexibility around taking federal holidays off. In other words, if we were staying in town on July 4th to avoid the crowds, I would often report to work and blow through a project or two while the office was quiet. This allowed me to keep those 8 hours of PTO for later use. I do not think this is the norm in other industries, but I absolutely love this flexibility.

Final Thoughts

In our modern-day economy, PTO is an important part of the benefits package. It’s actually my favorite part of it. We need time away from work to stay healthy and productive. We also sometimes need time away for things that are unanticipated.

I have always been blown away on how much paid time off I have gotten from the health systems that employed me. For someone who never gets sick, it always seemed like a generous allocation.

Max “getting paid” while eating fancy food in China

It is important to understand this component of your benefits package. Since employers have a way of presenting the same information in different ways, it is important to try and standardize when comparing job offers. Building up this bank can be a powerful thing and in some ways can be considered a form of an emergency fund.

How much vacation time or PTO do you get per year?


11 Responses

  1. Medimentary says:


    Benefits should be appreciated and it’s good to see you’re appreciating your PTO. It seems like industries have different models for payment and benefits. I’ve had different payment structures within the field of medicine and with it, different ways of looking at “time off”.

    As an employed physician, I had 20 PTO days (but this includes 6 Federal holidays, so really only 14 PTO days to use for vacation). Not enough in my opinion. After many years of service, I could work my way up to 30 days.

    As a wRVU (production model) physician I could take off as much time as I reasonably wanted, but it wasn’t paid. While off, I didn’t generate any income. This model has a lot more flexibility, but income can vary.

    As a locums provider, I had the most flexibility in time off and I could schedule not to work for long periods. But this model has the most inconsistent pay. Working as an independent contractor also has different tax and insurance obligations.

    I think each model has pros/cons and are appealing in different stages of a medical career. I must say, I enjoy time off, whether it’s paid or not!

    • Max OOP says:


      Thanks so much for chiming in here. It’s is nice to get some feedback from the provider side of the world. Frankly, I am not entirely sure if our general employee PTO policy extends to our physicians and other providers or if that is a separate negotiation. I was just looking at a physician contract last week for another reason and noticed that it specifically called out ‘administrative’ and ‘call time’, but I don’t recall PTO being outlined separately. Maybe they are under the same policy I am under? Some pretty decent stipends in there for medical directors as well.

      As an employed physician – 14 PTO days doesn’t seem like near enough. Have you ever been in a hybrid wRVU/base model?

      I’ve heard if you are willing to travel and be flexible, locums providers can be a great way to go.


  2. David says:

    Sadly, my current employer has “flexible time off”, aka no paid time off. “Take as much as you need.” In theory I could take 4 or 5 months for every 12 months (or more?) but in reality folks usually limit themselves to taking what’s customary, or less. Unfortunately this seems to be the trend in tech companies, mostly because no company likes having the liability on the books. That and “use it or lose it” policies generally encourage people to take it.

    I did know what I was getting into. However, my previous employer switched from PTO to FTO midstream, which caused no end of angst and frustration, especially when the switch was sprung on people on Jan 2nd, right after folks had drawn down their PTO. They paid out the PTO balances as a bonus, but employees that had drawn it down during the holidays were pretty frustrated that they didn’t have any warning. They might have taken fewer days, realizing that they’d get it paid out. Lots of ill-will on for DumpsterFire Inc.

    • Max OOP says:

      Hi David.

      I am hearing about more and more employers migrating to the FTO model. You are the first person I have run across who actually has experience with it. Do you get the impression your boss is keeping track of it on a spreadsheet somewhere? : )

      It certainly sounds nice. But like you, I could see a ton of drawbacks to it. It seems like it has the potential to create a lot of animosity between team members and might even brew a toxic environment. Also, how do they manage a significant illness or FMLA? It seems like trying to determine when someone is off FTO and on FMLA could get confusing. I am sure they have policies around that, though.

      Take care,


      • David says:

        I doubt my boss is keeping track of anything and I don’t keep track of it for my direct reports. But I think if anything got out of hand and I wasn’t performing, there would be a discussion about it.

        I’m not 100% sure how long term FMLA-related works. I think they leverage some short-term disability benefits but they do give 12 weeks paid for maternity/paternity leave. I’m guessing illness works the same way.

        We also get 10 paid federal holidays, which includes Columbus Day but not the day after Thanksgiving. But no time sheets or keeping track.

  3. Q-FI says:

    I thinks it good how you look at PTO. I probably haven’t given it enough thought in the past. At my current job I was told I get three weeks vacation but it turned out 15 days of PTO. So I had two weeks of vacation, 3 personal days and 2 floating holidays. I should have read the fine print. But this year my employer actually boosted vacation to 3 weeks for everyone. So I eventually got it. But the people that had negotiated three weeks originally were pissed.

    Also for salary people, at least with my current company of almost two years, we really don’t track vacation that tightly. I work a lot so you can take a day here and there and just tell your boss and not book it officially. There are probably a lot of other companies that do this “unofficial” vacation/PTO. Obviously that doesn’t work for hourly employees.

    • Max OOP says:

      My previous health system dealt with salary people the same way. We always had a busy time from January – February that required 55-60 hours of weeks. My previous boss would give me “work-load” days at the end of that to make up for some of the time. In other words, my PTO bank wasn’t touched. It was really nice.

      Same thing on holidays. Knowing we regularly worked more than 40 hours, a lot of time on holidays we would work a half-day but take credit for the full day. I liked it and it was never abused.

      Currently enjoying PTO in Calgary, Canada!


  4. Michelle says:

    PTO is such an important benefit. I would gladly give up some pay in exchange for more time off. When I started at my current employer almost 20 years ago, I negotiated the same amount of vacation time I had with my previous employer. What I didn’t do was negotiate a schedule for it to increase so I had to work there 15 years before I got more than I had on day 1.

    • Max OOP says:

      Agree, as my career progresses, money becomes less relevant. Flexibility and time off are more important.

      I think my health system gives us a PTO “bump” at 5 years, 10, and 15 years. I will have to look at how much we get at starting with year 15.

      How much of a bump did you get in year 15?

  5. Nice amount of time off Max! So essentially 10 stat holidays + 6 sick days + 3 weeks vacation for those don’t have it all lumped into a general PTO pot?

    I work shift work which allows for A LOT of time off. 40% of the days of the year a full time shift worker on my team is off to do as they please. Combo that up with the decision to switch to part time (50%) and I’m now off 80% of the days of the year. 73 shifts in the office and 292 days off each year to spend however I choose. Hard to believe it took me 5 months to decide to make this switch! Highly recommend shift work to anyone who can handle an odd schedule.

    • Max OOP says:

      Thanks, Court! I am currently using PTO in your neck of the woods – Alberta, Canada!

      This schedule you have set up sounds like an awsome schedule? What kind of work allows for so much flexibility?


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