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HR MATTERS E-TIPS
THIS WEEK'S E-TIP: Are PTO Plans Right for Your Organization?
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
 
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THIS WEEK'S E-TIP: Are PTO Plans Right for Your Organization?

Consolidated paid time off (PTO) plans, or PTO banks, give employees
flexibility in using their paid leave and are generally easy to implement.
Use the guidelines below to determine if a PTO plan is right for your
organization.
 
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THIS WEEK'S E-TIP: Are PTO Plans Right for Your Organization?

What happens under your vacation or sick leave policy if an employee
needs to stay home with a sick child? Or, what do you do if an employee
wants to take two days off to attend a nonwork-related seminar?

Under a traditional policy that separates vacation and sick days,
employees often feel as if they are forced to fake an illness to avoid
using their vacation allowance. With a paid time off (PTO) bank, you can
give employees a set number of paid days a year and then let them
choose how the days will be used.

PTO Defined

Under the typical PTO plan, employees are given a certain number of
days per year for all types of paid absences (including vacation, sick
days, or other approved reasons). Some plans also include holidays
(click for free model policy download) as part of the PTO bank.
Employees then use the days as their personal needs dictate. For
example, an employee may choose to use most of his PTO days to care
for a sick child or other family member.

Like traditional vacation policies, employees generally must get advance
approval to take planned days off. Most employers also reserve the right
to deny or reschedule leave according to business needs. Unlike
separate vacation and sick leave policies, most PTO plans do not require
employees to give a reason for the leave. As a result, these plans
generally do not require any medical verification of the need for a day off
for illness.

Advantages of PTO Plans

Many employers find this system easier to administer because they only
have to track the total number of days off and do not have to deal with as
many employee excuses. Employees like the flexibility and the control it
gives them since they generally do not have to justify or explain the need
to take a paid day off. This way, they are not forced to misrepresent the
reason for their absence and may be more inclined to give you advance
notice. Furthermore, employees who rarely use sick days appreciate the
additional time available to meet other needs.

Disadvantages of PTO Plans

But, PTO plans do have some disadvantages. For example, because
the distinction between vacation and sick days is obscured, employees
may take more time off as vacation and not save sufficient time for
illnesses later in the year. Consequently, you may end up granting all
the paid time off under the plan and then face requests for unpaid sick
time not properly banked for the end of the year.

In addition, since employees typically do not have to designate which
days are sick days, you may not know when the worker's absence
qualifies for Family and Medical Leave Act (FMLA) coverage. Thus, you
may miss securing proper FMLA medical certification or the right to count
the days already used as part of the employee's 12-week FMLA
entitlement. Finally, any unused time under a PTO plan may have to be
paid out at termination in states that require payment for unused vacation
and personal time as part of final wages (such as California and Illinois).
 
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Four Employer Considerations

To determine if a PTO plan is right for your organization, consider these
four factors:
  1. Attendance (click for free model policy download) patterns and costs. If employees are missing days
    for reasons not covered by separate vacation and sick leave policies (such as for
    child or elder care), a PTO plan may help.
  2. Organization culture and attitudes. PTO banks work well in
    flexible organizations that regularly delegate to employees the power to
    make decisions. On the other hand, managers who seek to retain tight
    control often will be uncomfortable and resist PTO plans.
  3. FMLA compliance. If your organization already has difficulty
    tracking FMLA absences because supervisors have trouble identifying
    which absences to count, a PTO plan may make the problem worse.
  4. State laws on pay at termination. If you have employees in
    states that require the payment of unused vacation at termination, and
    you do not want to pay this, a PTO plan may not be appropriate.

Four Tips for Implementing PTO Plans

Many employers that have adopted PTO plans feel they provide
flexibility, reduce headaches, and give employees desired control over
their time. If you decide to switch to a PTO bank, here are four tips for
implementing the plan that should help with the transition and improve
your chances of success:

  1. Determine what types of absences should be covered and then
    set the total number of days.
  2. Clarify how unused days will be handled. Specify whether they
    can be carried forward and paid at termination or must used exclusively
    as sick days. When employees carryover the unused time as sick days,
    they have an incentive to build reserves for future illnesses. At the same
    time, you may be relieved of the potential obligation to pay out the
    unused days at termination, since most states that regulate the issue
    only require the payment of unused vacation or personal days, not sick
    days.
  3. Establish procedures to identify and properly certify absences
    that qualify for FMLA. One way would be to establish a system to flag all
    absences over three days to determine if FMLA issues are involved.
  4. Educate both employees and supervisors about how the PTO
    works and its advantages. Plan to spend extra time with any supervisors
    who may be concerned about giving up some of their direct control over
    time-off decisions.
 
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YOU CAN TRUST PPS
Information provided in HR Matters E-Tips is researched and reviewed
by the HR experts at Personnel Policy Service as well as employment
law attorneys. However, it is not intended as legal advice. Readers are
encouraged to seek appropriate legal or other professional advice.

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in a newsletter?

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