In a recent study conducted by the Society for Human Resource Management (SHRM), 42% of employers offered a Paid Time Off (PTO) plan versus separate vacation and sick policies. Before jumping on the PTO bandwagon, make sure to consider the following pros and cons of PTO banks to ensure this system is right for your organization:
• Provides more flexibility and responsibility for the average worker, making it an attractive benefit option.
• Employees have the flexibility to use a PTO day for unexpected circumstances.
• Eliminates the rigidness of policies that address vacation and sick time as specific assignments.
• Eases administration.
• Employers may be constricted by specific state laws that govern labor law whereby a universal PTO program may not be an option.
• Employees may burn through all available PTO before the end of the year and then have an unforeseen illness arise forcing the employee to come to the office sick risking transmission of the illness to others.
• Consider potential financial implications regarding payout of accrued, unused PTO upon termination. For example, the state of CA has said that all PTO must be counted as unused, accrued vacation and must be cashed out when the employment relationship terminates. The employee has the right to and could use all PTO for vacation; therefore, employers that would have to pay out vacation when an employee leaves generally have to pay out PTO in full as well.
– 24 states (plus the District of Columbia) require employers to payout any unused, accrued vacation pay in the terminating employee’s final paycheck.
– Check out your state’s wage and hour laws to see what specific guidelines apply to you.
Carefully review these pros and cons to determine what type of paid leave policy works best for your organization and your employees. Need assistance revamping your paid leave policy? Give us a call. We help our clients develop and execute policies that benefit both their employee’s well-being and the company’s bottom line every day.