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Frequently Asked Questions about PTO

Frequently Asked Questions (FAQs) About Paid Time Off Policies and Procedures

Paid time off (PTO) is one of the most valued benefits employers can offer. Work-life balance and flexibility have become critically important to employees, particularly those new to the workforce. According to research by job search platform Zippia, 63% of employees wouldn’t consider a job opportunity if it didn’t include PTO.
What does this mean for employers who are struggling to attract and retain talent in a historically competitive labor market? We think organizations that employ a more flexible approach to time off will come out ahead of their peers. Having said that, it’s probably not enough to simply roll out a new policy. Our clients tell us that when they can link their PTO strategy to organizational strategy AND effectively communicate that link, they almost always see better outcomes.

So, are you ready to revamp your policies? If so, read on for a list of frequently asked questions that may help you navigate common issues and put together an effective strategy:

Q. Do you need to pay out unused vacation to employees who leave your company?
A. In most states, it is the decision of the company; but you must make this clear in a company policy or handbook. There are some states that require payment of earned, unused days, so be sure to check with legal counsel.

Q. Can you require an employee to use PTO if they haven’t requested it?
A. In many states, employers can require employees to exhaust paid time off before taking time off without pay. Again, check with legal counsel before implementing a practice or policy.

Q. What is the average number of paid holidays provided by employers?
A. According to the Bureau of Labor Statistics, employers in the U.S. offer 7.6 days of paid holidays annually. However, this number can grow substantially depending on job type and length of service.

Q. Are employers required to provide paid federal holidays or PTO?
A. In most states, employers are not required to offer any paid holidays or paid time off.

Q. Is it a best practice to grant a credit for paid holidays that occur during an employee’s vacation?
A. It is generally best practice to grant credit for paid holidays that occur during an employee’s vacation.

Q. What are some of the differences between a traditional leave program and a PTO system?
A. PTO leave plans generally encompass both sick and vacation leave (and sometimes other leave categories as well) offering more flexibility in how employees use leave. While PTO has become quite popular in the last couple of decades, not all employees or employers are in favor of it. Detractors have said that PTO programs typically offer less time off overall than a traditional vacation/sick leave program and can result in employees coming to work when they are sick to avoid using a PTO day that could later be used as vacation.

Q. How much time off should be awarded to new hires?
A. This varies greatly from one industry to another, but very generally, a minimum of 2 weeks or 10 days.

Q. What are PTO donation programs?
A. These programs allow employees to donate leave to other employees facing a serious illness or other tragedy in their lives who otherwise would not have the leave to cover their absences. In situations like this, employers should be aware of their compliance obligations under different federal and state laws.

Q. Should employees be able to cash out their unused time?
A. While some employers offer this, it is not a popular option. Most employers feel it is important for employees to take time away from work to re-energize and clear their minds with family and friends.

Q. Is it common to pay out vacation time upon termination of an employee?
A. In most states, this is up to the employer’s discretion as long as it is stated in a policy or employee handbook. Generally, it is about 50/50 with some doing so and some not.

Q. What is the difference between a paid sick leave policy and a PTO policy?
A.  PTO programs encompass both vacation and sick leave. There are typically a set number of paid days that can be used as sick leave or vacation leave.

Q. Where is paid sick leave required?
A. While all employers were briefly required to offer paid sick leave during the covid-19 pandemic, this federal mandate has expired. A minority of states have laws requiring paid sick leave, with requirements varying between different locations.

Q. I’m hearing quite a bit about unlimited PTO programs. What does this mean and what do we need to be aware of before putting this type of program in place?
A. Unlimited PTO programs allow workers to take as much or as little PTO as they want. While these programs are gaining in popularity, they are still not the norm. Employees typically like the flexibility behind unlimited programs and surprisingly, most people don’t abuse them. Companies interested in transitioning to unlimited PTO need to be aware of compliance issues, so it’s best to engage the services of a human resource professional before making such a change.

It’s good to be aware of best practices for PTO, but what about when employees need longer leaves of absence? Check out this resource on What Employers Should Know About FMLA and ADA Leave Requirements to get up to speed.