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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.
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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:
- 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.
- 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.
- 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.
- 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:
- Determine what types of absences should be covered and then
set the total number of days.
- 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.
- 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.
- 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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Subscribers to the
Personnel Policy Manual and HR Policy Answers on
CD can find more information on paid time off plans in Short-Term
Absences, Chapter 702, note 2.
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Information provided in HR Matters E-Tips is researched and reviewed
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