Should You Offer PTO?

Life is unexpected; sometimes it’s in the form of an emergency, and other times, it’s in the form of a miracle. Either way, we can’t control life’s surprises, whether good or bad.

However, we can control how we react and respond to them –- and as an employer, you can control how you help your employees who are struggling with the “what happens now?” question by providing paid leave or PTO.

Maybe they’re sitting in the hospital, wondering how they’re going to support and pay for their child’s diagnosis. Or maybe they’re looking at two pink lines wondering how they’re going support a baby. Or maybe they’ve been struggling with family issues and feel burned out, depressed, and hopeless.

Almost half of the workers in the United States do not have a paid leave program.

Paid Leave Programs (PTL) has allowed millions of workers to take time off work to care for themselves or loved ones. The benefits of a paid leave program are well established. It provides:

• New parents with paid time off to care for newborns or recently adopted children
• Improves maternal health and supports the fathers’ involvement
• Self-care or care for a loved
• Enhances a family’s economic security

Paid leave programs also benefit the business itself and the economy, improving employee retention and increasing productivity — without increasing operating costs.

After all, happy employees are more productive. For example, a woman is more likely to return to work after taking paid leave, instead of facing the decision to quit in order to care for their newborns.

Create a Paid Leave Program

1. Purpose or Intent. First, consider your purpose or intent. There are several reasons you may want to implement an absence plan. 

• To stay competitive with market reaction
• To build a rewards program for employees
• To improve productivity

Once you establish the need for a paid leave program, you can determine the parameters: how much to provide, when to provide it, and how it will affect the culture of the business.

• Type and Eligibility. Begin determining which type of paid time program you prefer, and then consider your state plans if applicable.

• Traditional sick and vacation plan
• PTO plan
• State plan

Employees tend to like PTO plans because it’s flexible and allows them to determine how their paid leave is used. Employers also favor PTO plans because they don’t have to monitor why their employees are taking leave.

Let’s review the typical paid leave plans.

1. Vacation/Sick Plan: Under this system, vacation is generally reserved for rest, relaxation, travel, and other planned reasons, averaging 10-12 days of paid vacation. Sick leave is also included in this plan, but it’s generally used for unplanned, short-term absences, around 8-12 days a year.

• PTO: PTO is a bank of leave that the employees may use for any reason, whether that’s due to personal reasons, family illness, vacation, or any other issue determined by the employee. Usually, an employee receives 10 paid holidays and 10 days of PTO every 12 months.

• Unlimited PTO: Unlimited PTO (or a hybrid plan) allows employees to take as much time off as they would like for personal matters, vacation, medical leave, etc. However, unlimited PTO must not interfere with business operations and tasks.

• How and Eligibility

You’ve determined the type of plan you want, but how are you going to implement it? First, let’s decide how the employees will receive their paid leave.

How do you implement PTO?

Every employee who is eligible can either receive their paid leave days or hours through an accrual plan or bank (lump sum system).

• Accrual System: An accrual plan is a percentage of earned paid time for every hour worked.
• Example: An employee worked 40 hours and earned 1.5 hours of PTO.

• Bank or (Lump Sum): A bank plan gives the employee the full amount of earned paid time at the start of employment.
• Example: An employee is hired today and receives 30 hours of PTO.

Eligibility

Now, you have to which employees benefit from paid time off. Some companies provide all employees with paid leave benefits or give different leave benefits to different groups of employees. However, your plan must follow state and federal laws and it cannot discriminate against a protected class.

For example, an employer may offer a different type and amount of paid leave to exempt vs. non-exempt employees, regular vs. temporary employees, and office employees vs. field workers.

Employers must also determine if part-time workers will be eligible for paid leave benefits.

Paid leave programs to affect employers financially, administratively, and operationally; therefore, an employer should have a well-designed plan that meets both the employer’s and the employees’ needs.

1. All employees who are scheduled at least 30 hours per week are eligible for paid time off.
2. All full-time employees are eligible for paid time off.
3. All salary-exempt employees are eligible for paid time off.

Let’s look at the following example of a PTO plan with accrued rates based on an employee who works at least 40 hours a week and has served x months of service.

A Sample PTO Plan with Accrued Rates

Months of Service	Accrual Rate per Hour Worked	Limit Per Year
0	.0384 hours	80 Hours
12	.0577 hours	120 Hours
48	.0769 hours	160 Hours
120	.1154 hours	240 Hours

Paid time off accrues after hire and provides flexibility and personal responsibility to the employee. It accumulates each pay period worked, and it’s up to the employee how to use it – whether that’s for vacation, illness, appointments, or family.

However, some companies require employees to use any unused PTO during disability or family medical leave when permissible according to state and federal law. The amount of PTO earned depends on an employee’s length of service with the company.

An employee is eligible to receive PTO if they are a full-time employee scheduled to work at least 40 hours per week. Employees working less than 40 hours per week are not eligible for PTO.

Deposits into Your Leave Account

The amount of PTO accrued each year is based on the length of service and it accrues according to the schedule determined by the employer.

• PTO is accrued when an employee is working.
• An employee cannot accrue PTO while taking time off.
• PTO doesn’t carry over; it’s a use-it-or-lose-it policy.
• Upon termination, an employee cannot be paid for accrued PTO.
• The amount of PTO accrued, used, and available will appear on the employee’s paycheck stub.

Using PTO

The minimum amount of PTO an employee can use at one time is one hour. You cannot borrow against your PTO bank; therefore, advance leave is not allowed.

Carry-over

This plan does not allow for any carry-over amount.

Notice and Scheduling

An employee is required to provide their supervisor with reasonable advanced notice and obtain approval prior to using PTO. This allows for the employer or manager to prepare for the time off and assure that all staffing needs are met.

There may be occasions, such as sudden illness or emergency, where advanced notice cannot be provided. In those situations, an employee should inform their supervisor of the circumstances as soon as possible.