We recently converted our vacation and sick day policy to PTO. The policy allows for PTO to accrue monthly at different rates based on years of sevice. We are getting a number of questions about how to interprut the policy based on ones Hire/Anniversary date. So if someone has 5 years service they are entitled to 20 days of PTO and our assumption is that each year you accrue days and use them in the following plan year? Would that be the correct interprutation? In your first year of service one cannot take any vacation until you've worked 180 days and accrued 7.5 days in that time.
Once you set up PTO how should it accrue and allowed to be taken?
Answers
You should have included the your intended earnings vs utilization calculations in your policy when you set it up. Time for a do over or, at least a clarification for the employees. Just be sure not to cheat them out of anything they had coming from the prior vac/sick policy. i.e. whatever they had already earned on the date of conversion, is theirs to keep and use as they see fit from day 1.
I suppose it's not too difficult via software to use an employee's anniversary date as the start of a new accrual year. Another approach is to reset the clock at your fiscal new year. If an employee was hired in the previous year, they'll have one year of service for PTO. I've always liked a use-it-or-lose-it (UIOLI) policy where on the last day of the year all PTO ledgers are wiped out and reset.
Some may have a problem with letting employees possibly use time that hasn't yet been earned (a vacation in March may put the employee in the hole) but I've rarely seen that become a problem. UIOLI has four major benefits in my mind:
1. it allows employees flexibility in scheduling time off.
2. it helps the company encourage employees to take a vacation and get refreshed.
3. it eliminates folks treating their PTO as a savings account to be cashed in when they leave the company.
4. it eliminates the need to record PTO as a liability since UIOLI takes the account to zero at year end.
As for the communication fubar:
Whether the company is large or small, if there is confusion in the ranks over policy that directly affects employees' pocketbooks, you should figure out how to clear up the confusion as quickly as possible. There's nothing wrong with doing a modest reset, as long as employees are left whole. If the company has to absorb some added cost up front, remember that it's a one-time hit. More important is keeping employees well versed in what their benefits look like.
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Robert:
UIOLI policies are legal minefields.
For instance, in CA, I can cap an accrued leave balance at a given level. But I can't "wipe out the PTO ledgers" at year end and take away PTO earned by an employee.
I can however, have a "UIOLI" policy for sick leave because it is more like an insurance policy than compensation whereas, accrued vacation leave is not. (Legal perhaps, but there are
The logic behind these protections is sound: An employee's compensation includes earned time off. To take it away for non-use is tantamount to taking away earnings.
I'm sure this varies from state to state but I'd caution anyone contemplating a UIOLI policy to be sure it is legally compliant.
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Human Capital