Vacation Accrual and Time-Off Policies: Things You Should Know
Time off is one of the most coveted of employee benefits. Many organizations do their best to offer a generous paid-time-off (PTO) package as a best practice for attracting and hiring top talent. As a small business owner, a PTO program may present specific challenges due to the nature of your work, the number of employees or even something as banal as recordkeeping. However, in order to stay current with some of your larger competitors, it is imperative that you provide your employees with some type of PTO and that you are consistent in how you grant it.
What Is PTO?
Paid time off is a relatively new model in the workplace that no longer makes a distinction between vacation days, personal days, paid holidays and sick days. Instead, all of the time off an employee is allotted is grouped into one category.
For example, if a company outlines the following paid time off in their handbook:
- 10 Vacation Days + 10 Paid Holidays + 2 Personal Days + 8 Sick Days
Their PTO days would total 30 (10+10+2+8).
While many organizations still require employees to take paid holidays on the actual day (i.e. they are not in the office on Christmas), the other PTO days can be taken for whatever reason the employee wants (e.g. they can use a “personal day” for vacation).
PTO plans have become more accepted as a way to further entice top talent. Employees prefer this system since many never take all of their sick days in a year, and this allows them to use those days for other pursuits. However, some organizations still require that their employees distinguish between sick days and vacation days, and their unused sick days expire at the end of each year.
Accrued Time Off
Most PTO plans work on an accrual system, meaning that employees earn a portion of PTO every pay period. Typically, employees earn somewhere around 1 day of PTO per month. Some businesses choose to increase the accrual rate in increments for employees who stay with the company longer. For example, employees may accrue an extra .25 days per month if they are with the company for 2 years and an extra .5 days per month if they stay beyond 4 years, etc.
Considerations for Small Business
As a small business owner, there are a few details related to PTO that you should consider when setting up your policy:
- Record Keeping: PTO management should be the handled by your HR department, your office manager or an online HR service (such as TriNet). However, if your business is very small, it may fall on the employer to record all accrued and available time off. Manually keeping track of these records can present problems, so make sure you fully think through the process of how an employee must request time off, how far in advance the request should be submitted, what type of approval he or she should receive, and who else within your organization should be notified in order to keep track of everything. In some cases, an email chain may suffice, but you’ll want to be sure it’s a buttoned-up process before you actually implement it.
- Multiple Requests: If you are a small business and have only a few employees, it’s possible that you will receive multiple time-off requests for the same timeframe (i.e. near Thanksgiving and Christmas). If so, you need to have a policy in place for how to handle this. Some small businesses choose to close during these weeks, as business is slow anyway, while others simply implement a first-come, first-served system. Whatever policy you decide on should be clearly outlined in your PTO documentation, and all employees should be required to sign-off on it.
- Workload: Depending on the nature of your work, giving employees certain days off or granting requests during certain periods may be impossible. For example, many retail establishments require that their management teams offer full availability throughout November and December to manage the increased holiday traffic. If your business is prone to similar spikes in transactions or production, it is important to put these dates and/or conditions into your PTO policy. It’s imperative for employees to understand that, while you are committed to offering them flexibility, there are certain times of the year when business requirements may dictate what is and what is not possible.
While offering your employees time off is not mandated by the federal government, it is a common practice among employers across the globe and in the United States. Not only does offering a policy keep you competitive, but giving your employees paid time away from work will increase their productivity and encourage a healthy work/life balance.