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Balance the pluses and minuses of switching to PTO banks

by on
in Compensation and Benefits,Human Resources

Some employers have retooled the traditional method of setting paid time off in separate categories by folding vacation, personal or sick leave entitlements into one “bank.” So-called paid time off (PTO) programs allow workers to use banked time without designating the reason for taking a day or multiple days off from work.

PTO offers benefits for employers and employees alike, but there are some potential pitfalls if you are not careful.

Advantages of PTO

Employers that have switched to PTO programs report administration is easier. Regardless of the reason for leave, absences fall under the same code. The headaches of deciding whether or not a worker is entitled to leave are eliminated.

Also, it’s usually simpler to write the policy for a PTO program, since it need only differentiate between scheduled and unscheduled absences.

Many employers report that unscheduled absences decline after switching over to a PTO program. Reason: Employees are less inclined to take days off just to burn their sick time. Also, workers don’t have to resort to excuses about an unscheduled absence, claiming that they themselves are ill when, in fact, they simply had to stay home to care for a sick child.

Flexibility boosts morale

Employees appreciate the greater flexibility of PTO banks. Under the traditional system, a worker who got the flu in January and wiped out her sick leave allotment risked having to take unpaid leave if she got sick later in the year—even if she had plenty of vacation leave available.

PTO programs are fairer, since workers who rarely call in sick get just as much time off as those who take their full sick-leave allotment every year.

Potential PTO pitfalls

Transitioning to a PTO system can be difficult because employers must convert leave accrued under the old system into the new bank. To get around this, some employers pay employees outright for time owed under the old system, creating a clean slate to start the new system.

Another PTO drawback: There may be a higher payout after an employee leaves a company. Some states require payment of unused vacation and personal time as final wages due at termination. In those states, there is the potential that the entire PTO bank may have to be paid after an employee leaves. Investigate your state’s law on compensation after separation.

It may also be hard to tell when an absence is legally protected under the FMLA. To avoid this, some em­­ployers ask for medical certification for unscheduled absences that last for more than three days to determine whether they should be counted as FMLA leave. This ensures that employees aren’t improperly penalized for excessive absenteeism.

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