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It’s time to Consider Implementing a PTO Program

Posted on December 12, 2016

We often recommend that employers switch from a traditional leave program (sick time and vacation) to a paid-time-off (PTO) system because of the numerous advantages for employers and employees alike.

Things to Consider When Implementing a PTO Plan

  1. Diagnosis, care, or treatment of an existing health condition, or preventive care for, an employee or an employee’s family member;
  2. For an employee who is a victim of domestic violence, sexual assault, or stalking. 

PTO is a bank of days from which employees can draw for vacation, sick leave, doctors’ appointments and personal days off from work. In contrast, traditional leave programs allocate a specific number of days for vacation and for sick time.

Moving to a PTO system has many advantages, including: reducing unscheduled absences, and the costs and productivity losses associated with them; making an employer more attractive to current and potential employees, especially those who value discretionary time off; reducing administrative and compliance costs, as PTO use no longer requires validation in most instances; and empowering employees to make their own decisions regarding the amount of vacation and personal time spent away from work.

In California, because of the recent enactment of sick leave laws, employers have shied away from implementing PTO plans. The state of California has determined that PTO plans fulfill the requirement to provide paid sick leave as long as the PTO plan provides the minimum amount of paid sick leave required by the law. Employers must also allow employees to use their PTO for the same reasons outlined for the use of paid sick leave.

PTO encourages employees to manage their time off more and to use more vacation time and rely less on the occasional sick day as a means of staying out of the office.

Ensure there are clear procedures for employees to give a specific amount of notice (e.g., three days) before using a PTO day unless the employee is sick or has an emergency.

Employers should also define the types of absences an employer includes in the PTO bank. As we stated above, employees must be allowed to use PTO for the same reasons they can use paid sick leave under the California law. These reasons include:

State explicitly how many PTO days will be available to employees based on job level, seniority or other factors and if there is a cap on PTO accrual.

Another thing to consider is whether employees are allowed to carry over unused days from one year to the next, and if not, whether the account must be paid out by year’s end, and if so, what the formula is for calculating unused PTO days.

In California, employees leaving the company must receive the payout value of their PTO. Employers should consider this when designing their program and determining the cap on accrual.

Developing and implementing a PTO program that is clearly defined in all of its aspects can be mutually beneficial to the employer and employees and can improve morale and productivity.

Lauren Sims is the author and a Principal HR Consultant with eqHR Solutions.

Whenever you require Human Resources or Payroll advice or help to navigate the ever-changing landscape of California and Federal Employment Laws & Regulations, call us for a no obligation consultation.

eqHR Solutions is a leading human resources and payroll consulting firm, providing tactical and strategic human resources employment support and ADP payroll product training. Services are provided for all size businesses in Southern California and the San Francisco / Bay area.