Vacation, Bereavement, Sick Days

Vacation, Bereavement, Sick Days. As an employer, it’s very important to understand the different types of HR policies when it comes to employees’ time off. As a leading small business consultant company, we’ve grown to understand a lot about how the implementation of HR policies affects different sizes and types of business. We now know that it’s very important to consider the pros and cons of different policies for your company specifically. Let’s consider the three main types of HR policy; paid time off, vacation pay, and sick days.  Of course, these are our observations from our years of experience but you should always consult with your attorney regarding your company’s HR Policies…

Paid Time Off (PTO)

Paid time off, or PTO, is a usually the best option for small business owners. It combines reasons for time off, such as vacation time and sick days, and packs them into one policy with a set number of available days off. Essentially, any time an employee is away from work, your company will pay them according to the policy in place. PTO can include any reason the employee is not at work: vacation, sick, jury duty, or just personal days.

Using the PTO is not one size fits all for everybody. It really depends on the size of your company. If you have more than 50 employees, you fall under the Family and Medical Leave Act of 1993 (FMLA), the federal labor law that requires employers to provide employees with job-protected and unpaid leave for qualified medical and family reasons.

Requirements for companies with fewer than 50 employees are a little less stringent and PTO can really help alleviate the administrative burden of tracking specific reasons employees are not at work. Most businesses, when they’re below 50 employees, cannot afford to have a full-time HR administrator. As a result, the administration efforts fall on the accounting department or some other staff member and it’s a cumbersome job. The ability to actually track vacation time, sick day time, bereavement time, jury duty time, and all these other items, becomes a burden on the company.

It’s a lot easier on the business and the employees to have a PTO policy. Then, it doesn’t matter whether you take vacation, sick, bereavement, jury etc. We’re not going to count it as that, we’re just going to say you have, for example, 15 paid time off days this year, in addition to your holiday time, and you can use them how you want to. It’s a lot less burdensome on the company and on the employees since they don’t have to make up excuses or lie when they want time off, it’s just irrelevant. If you’re going to take four half days off, it goes against your paid time off. And, you don’t have to go to the doctor and get an excuse slip or have somebody lie for you. It simply goes against your PTO.

Most PTO policies don’t carry over from year to year. It’s a “use it or lose it” system, or you stop accruing when you reach the maximum amount for a twelve month period until you start using the PTO. However, some employers will allow longer tenured employees to carry over two to three days from year to year, just so they don’t have that crunch on the timeline at the end of the year. In our experience, its also best to allocate PTO in no less than ½ a day at a time. Otherwise, smaller increments become too complicated to track across the whole staff.

A disadvantage of PTO is that, depending on which state your business is located, there could be different state legislation in regards to paid time off. This means that there is far less allowance for employer discretion when compared to paid leave being divided into separate categories. What your state considers legitimate reason for time off work will determine which reasons can be put under your company’s paid time off umbrella.

There are negative situations for the business owners which may arise as a result of a paid time off policy. Due to the fact that employees do not need to take off all of their allotted time during a certain period, this can mean a big payout for the company when employees who have managed to save up a lot of PTO leave employment, due to a buy-out clause in their employment agreement if one exists. Such clauses are a necessity to ensure employees get a fair deal, but can cause difficulties for employers later on. There might also be problems due to employees either being too cautious, and not taking vacations because they want to ensure they have available days off left in case of unforeseen circumstances, or not being cautious enough, and booking long holidays with no allowance for illness or emergencies. We also recommend a PTO policy be administered effective the employees anniversary date to eliminate year-end crowding of PTO requests.

For help figuring out a paid time off policy that works for your company, but that will also make your employees happy, your best bet is to think it through and then consult an attorney who understands the labor laws in your state.

Vacation Pay

It can be confusing to differentiate between vacation time and paid time off. Vacation pay is essentially leave that can be taken without condition. This means that, depending on the laws of the local area or the policies put in place, employees will need to be paid for all vacation time.

Vacation time also means that employees have a great deal of discretion when it comes to choosing their days off. This is great news for them, as it allows them to fit their working lives around holidays or important commitments. This arrangement works for employers, as long as a minimum period of advanced notice for holidays is required and company policy requires holidays to be arranged in keeping with a provided business schedule.

The advantage of vacation pay are various: being paid for vacation time is something that will keep your employees very happy. This will have a domino effect when it comes to employee satisfaction and the retention of staff who won’t go looking elsewhere for a job with a better policy. For employers, there are other advantages that come with paid vacation time. Unlike with other forms of paid leave, employees do not have to take a minimum amount of days off to fulfill a legal requirement. It’s likely that many employees just won’t end up taking all of their time off, leading to better productivity for you and your business.

However, some employers are able to save a lot of money by not allowing for vacation pay, and whether or not your business offers paid vacation leave needs to be considered on an individual basis. There are a variety of factors to consider – are the majority of your staff full-time or part-time, how competitive is the job market, how satisfied are your staff at present?

Another disadvantage of vacation pay for employers is that due to the flexibility it offers your employees, you might find yourself short-staffed at busy times such as over the holiday periods. For this reason, it’s important to think deeper into the type of business you want to be, and also your specific needs as a small business owner. For example, a retail business will need to think carefully about how long periods of vacation time for staff in the lead up to the holiday rush might affect them.

With a trained business coach, you will be able to work out how allowing paid vacation time might affect your company and you’ll also be able to understand how vacation time relates to our next HR policy – paid time off.

Sick Days

Paid sick leave is similar to vacation pay, due to the fact that it creates a policy which allows for a certain number of days off for a specific reason, rather than an overall amount of time off as in a paid time off policy. Putting a limit on sick days has both advantaged and disadvantaged groups. For many companies, particularly those with casual or part-time workers, there can be an issue with employees taking ‘sick days’ at times when they really just need paid time off. Putting a limit on the days off they are able to take for any one reason, with a specific HR policy catering for this, means they’re far less likely to take sick days without a valid reason.

However, for employees who suffer from a particular health condition or who are ill more often than their colleagues, putting a limit on sick days in this way means they might struggle to meet the requirements of the policy and will find themselves in a difficult position. For such employees, a paid time off policy will be far less stressful, as they will be allowed just as much time off as other members of the company which will allow for more sick days if necessary.

Depending on the field your company is in, however, a more traditional approach to days off through different categories might be a good idea. With the right HR policy in place, you’ll be able to find a plan that works for your employees, without creating any vulnerabilities that might cause your company’s paid leave generosity to be taken advantage of.

The best choice for your small business will depend entirely on you, your employees and the type of company culture you want to create. For more information about any of these types of policies, or how we can aid you in creating a fair, mutually beneficial policy when it comes to paid leave, contact us today.

Additional Sources:

http://hrdailyadvisor.blr.com/2013/08/31/pto-and-vacation-whats-the-difference/
https://www.fuseworkforce.com/blog/what-are-the-pros-and-cons-of-paid-time-off-policies

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.