Does your organization use a (paid time off) PTO bank instead of having separate vacation and sick days? It’s becoming increasingly popular for ease of administration alone. But using PTO is not without its own problems, especially if not implemented well.
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Here are some potential PTO pitfalls to watch out for:
- Failure to communicate policy details can mean frustrated employees (and employers). When a PTO program is implemented, or even after it’s already in place, communication of the policy details is critical. For example, employees need to completely understand employer expectations in terms of notice required to take PTO. If employees don’t understand how the policy works in practice, there are sure to be misunderstandings and potential frustrations.
- Not accounting for rollover issues can cause financial liability. Whenever an employer has any type of absence allowance—whether that’s vacation or PTO or some other accrual—there is a question of whether or not the accrued days must be used in the year they are awarded (commonly referred to as “use it or lose it”) or whether those days can roll over into the next year. There are several issues to consider on this point. First, in some states, “use it or lose it” policies are illegal on time that accrues as that time is considered to be employee earnings and cannot be taken away. (This is often cited as a potential downside to PTO banks.) As such, if employers allow all unused PTO days to roll over into the next year, it could create a situation where employees build up high accruals and have no way to effectively utilize the days, resulting in a financial liability on behalf of the employer to pay the employee for all accrued days if the employee leaves. Employers usually get around this problem by putting a cap on accruals, by putting a minimum on PTO days taken each year, or by putting a limit on how much can roll over (if allowed in their state) at the end of the year—or a combination of these items.
- PTO usage is often inconsistently enforced among salaried employees. For example, some supervisors may not blink if an employee takes time away from work for an appointment without logging PTO time, while others may require all time away to be accounted for and deducted against PTO time without exception. This example and many more can create situations in which employees are not being treated consistently, which can lead to much bigger problems like discrimination claims. Managers need to always implement the policy consistently to avoid this problem.
- Allowing negative balances can be a risk. A negative PTO balance can happen if an employee has used all of his or her accrued PTO but still needs to take more time off. For limited amounts, employers often allow this and simply count it against the soon-to-accrue days. The problem occurs when an employee leaves before making up this time. In theory, the employer could deduct this from the employee’s final pay, but in reality this act might run afoul of final pay laws, thus leaving the employer to find other ways to collect—often meaning it’s simpler not to. This is a relatively small risk as long as the employer does not allow too much PTO to be taken before it has actually been accrued or earned.
- Failing to require PTO to be taken concurrently with other leaves of absence can be problematic. Most laws relating to other types of leave, such as the FMLA, allow employers to count absences against an employee’s FMLA allowance and PTO allowance concurrently. If this is not required by the employer—or simply not enforced—the employer may be left with a situation where an employee has maxed out his or her allowed leave of absence under other leave laws but still has not used all of the PTO and can continue to take time away and be paid for it, placing additional burden on the employer to cover for the absences.
Does your organization use PTO instead of separate vacation and sick days? What problems have you encountered and how have you managed them?
*This article does not constitute legal advice. Always consult legal counsel with specific questions.