Recording an employee's time off in Karbon is not required, however for some firms, it may be a helpful way to get a complete picture of how that employee's time is allocated.
If recording time off would be helpful, create a contact called "PTO" (Personal time off, or any other name you'd like), then ask employees to record time entries against that contact.
For larger firms with multiple teams, you can set up a contact for each team. You could also consider setting these contacts to private or hidden if the data is not meant to be shared across the whole team.
You can also set up a non-billable task type to use with time off to help identify and report on those entries.