Employment law does not mandate the allowance of paid time off (PTO) to employees for events such as vacations, personal time, and sick days. It is, however, a best practice of Employers of Choice.
Employers have flexibility regarding the amount of time off, if any, they will offer to employees. However, a written policy is the best way to communicate your PTO policy to employees. This will allow them to know in advance how much they are allowed so that they can make personal plans around that, in addition to other important information. There are several details that we recommend employers consider when creating or changing a PTO policy.
- Will PTO be offered as one category to be used for all time off? Or will it be categorized differently, such as vacation, sick time, etc.?
- How much PTO do you allow employees? Does it vary among different departments or increase with seniority?
- When is the PTO available for use? Will the PTO be front-loaded to the employee or accrue per paycheck? May an employee use vacation time before it has been accrued? Is rollover is allowed?
- What is the request process for PTO?
PTO and Separation
One of the most important parts of your PTO policy relates to if and how PTO will be paid out upon separation. It should state whether or not you will pay accrued but unused PTO to departing employees and under what separation circumstances. If your state has not issued regulations on this then you have flexibility with how you create this policy. (New York State has not.) For employees that voluntarily resign with proper resignation notice, or have been laid off due to lack of work, ESC recommends paying them their accrued but unused PTO. Employers should be aware that if there is not a specific policy related to this you may be required to pay out unused PTO upon separation.
Always remember to have employees sign the employee handbook “receipt & acknowledgment” page upon hire and after any change of policy.
If you would like to review your current PTO policy or you don’t currently have a PTO policy in place and would like to establish one, please contact your ESC HR Consultant.