PTO policies are considered easier to administer than separate vacation, sick, child care, etc., but there are many policy issues to be decided before your program runs smoothly and avoids lawsuits, says attorney Katherine Marques.
Unfortunately, to complicate matters, many state laws (and some city laws) cover sick time and/or vacation time, so proceed with caution, says Marques, an associate in the New York office of Holland & Knight LLP. She offered her tips at a recent webinar sponsored by BLR® and HR Hero®.
PTO Policy Decisions Are Important
Policy is very important, says Marques, especially since non-HR managers have to work with PTO issues every day. Keep policies general enough that you don’t have to keep making exceptions, says Marques. If you’re constantly making exceptions, your policy isn’t doing its job, and you’re looking at potential discrimination claim.
Here are Marques’ key policy questions:
1. What Is Your Definition of PTO?
What’s in the bucket? asks Marques. All time off? Just certain types of time off?
2. What Is Your PTO Accrual Schedule?
Will PTO build up over the year (e.g., 2 days per month) or will there be a yearly allowance available on the first day of the year (e.g.,15 days beginning on January 1, or fiscal year)?
3. Will You Impose Use It or Lose It?
Be aware that use it or lose it policies for accrued time are contrary to some states’ laws, says Marques. Typically, those states consider PTO as a part of compensation that should be used or paid for.
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4. Will You Limit Rollover?
Even where use it or lose it is prohibited, you may be able to limit rollover from one year to the next. (Again, check state law compliance.)
Employers want to do this to limit the ability of long-term employees to rack up months of paid leave that will have to be paid out in a lump sum on departure. It’s also helpful to minimize the problem of figuring out what rate was in effect when the time was “earned.”
There are several ways to limit rollover. For example:
- Cap the number of days that can be rolled over.
- Require written approval to log rollover.
- Allow rollover only for limited time period (e.g., January through March).
5. How Will You Deal with Partial Days Off?
Generally, exempt employees may not receive partial unpaid days off. However, the Family and Medical Leave Act (FMLA) provides a mechanism to do so for intermittent leave for “serious health condition.”
Nonexempt employees should be docked for partial absences, either by dipping into PTO or by docking pay, says Marques.
6. Will You Require Mandatory Time Off?
Generally, employers can force nonexempt workers to use their time off by not assigning work and then applying paid time off. The bottom line for that week is unchanged, but the overall budget is managed. (Again, exempt workers must normally be paid for any day on which they do work.)
7. Will You Have Special Rules for New Employees?
For example:
- Is there a waiting period before any PTO accrues?
- Is there any proration for new employees who begin in the middle of a period?
- Does an employee on extended leave keep accruing time? (Check for state law compliance before deciding this one, says Marques.)
8. Will There Be Restrictions on Taking PTO?
For example, multiple employees with key skills may not be out at the same time, time around holidays, or the company busy season is restricted, etc.). Employers can generally refuse nonmandated leave requests, says Marques, but make sure your policy reads that way.
These restrictions may be companywide or departmental, she adds.
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9. How Is Leave Requested?
Require advance notice for leave, says Marques. Set up a standard method for requesting time in advance. Be sure to reserve company discretion to approve planned absences.
For employees and all the way up the chain, PTO isn’t a free-for-all, says Marques. Set the protocol for notice and scheduling so that all employees know.
10. What Is Your Method for Tracking Time Off?
You need a good method for tracking time off, and a method for reporting absences (for example, employees have to call in by 7 a.m., and speak to an actual company rep or keep calling until they do. Or maybe a voice mail is OK.) Supervisors need to enforce this policy. (Note that statutory mechanisms, e.g., the FMLA, may take precedence, Marques says.
11. How Will You Pay upon Termination?
Set your policy concerning payment upon termination for unused time (remembering that this may be dictated by state law, and may need to be shared with the employee at hiring).
In tomorrow’s Advisor, key considerations for PTO policies, plus an introduction to the all-HR-in-one website, HR.BLR.com.