By Linda Bisca, HR Services Partner
An estimated 200 million vacation days are forfeited by American workers each year, resulting in more than $66 billion in lost benefits, according to the U.S. Travel Association. While it may seem like that sacrifice is good for your company’s bottom line, the issue is more complex. You may wonder whether you can and should require employees to take their paid time off (PTO). Depending on the situation, the answer varies.
Although no federal or state laws require employers to give PTO to employees, best practice recommends organizations give their employees some PTO (or vacation/sick time) per year. The beauty of having a PTO policy rather than vacation and/or sick time, is that it can be used for any reason employees need to be out of the office.
- Vacation. PTO for vacation gives employees essential time to rejuvenate. Vacation helps employees come back to work more energized and more productive.
- Illness. PTO can also be used for “sick” days to recover and limit others exposure to their illness. Taking time off to recover from an illness, helps employees return healthier and better able to perform their job versus being ill and trying to function in the workplace. Therefore, Paid Time Off is not only a benefit for the employee but can also aid the business.
However, sometimes companies discover employees not using their PTO time, so that their balance carries over into the new year. If your company does not have a policy that limits the number of hours/days an employee can carryover from year-to-year (as allowed by law), it may find itself in a financial problem. These employees could potentially have a very large payout of PTO at time of termination or retirement. This could result in an enormous unplanned financial liability for the company. It is very important to include carryover limits in PTO policies. Some businesses want to enforce a “use it or lose it” policy, but some state laws prohibit this type of practice. A Professional Employer Organization, like Resourcing Edge, can help you build a compliant Paid Time Off policy that benefits your employees and your business.
FMLA. There are times when an organization can and should mandate employees to use their PTO. If an employee is eligible for Family Medical Leave Act (FMLA), and the employee has unused PTO days available, your company can require that the employee use their PTO concurrently with the FMLA leave. By requiring concurrent use, you block the stacking of leave. For example, if an employee has four weeks of PTO and 12 weeks of FMLA, the result won’t be 16 weeks of leave. Instead, the four weeks of PTO will be taken at the same time as FMLA. The employee would have four weeks of paid leave and the remaining eight weeks unpaid.
Additional times to mandate leave may be when the company closes for a period of time. Some businesses, for example, close for a week at the holidays, others in the summer for maintenance. For these times, the employees would be required to use their PTO in order to receive pay.
R & R. Studies show that employees who take time away from their jobs to rest and relax are more productive. If you’d like to make sure your employees are giving their best performance, you might consider mandating time off for vacation. For example, a PTO policy can require that employees take off at least 10 days a year and five of those must be consecutive.
Partial Days. Another circumstance where a company may be able to influence the use of PTO, is when employees are late for work or are leaving early. Employees can be forced to use their PTO, if written in their policy accordingly, (i.e. “employees may take PTO in two (2) hour increments”) during these situations. By partnering with a PEO, companies can depend on its HR expertise to design policies that meet their business needs and are compliant with existing law.
Drafting a PTO Policy
A clearly written policy regarding the use of PTO is key. Employers must ensure employees understand the organization’s expectations. According to the Society of Human Resource Management (SHRM), a policy should indicate the periods of time during which PTO is restricted, the number of employees that can be out at one time, procedures for requesting time off, process for prioritizing multiple requests, and whether available time will be automatically deducted for absences.
Employers aren’t required to provide PTO, unless in jurisdictions where it is legislatively mandated. But by offering paid leave your business is more competitive to hire and retain best employees and those employees will likely be more productive. If you have a PTO policy, you can require time be taken off, and there are reasons you should do so.
If you’d like to learn more about how Resourcing Edge can help you with HR, payroll, benefits, and more so you can concentrate on your bottom line, contact us. Our HR pros can partner with you to draft a PTO policy for your employees and help you encourage them to use it.
HR Services Partner Linda Bisca has more than 25 years of Human Resources experience in the areas of compliance, employee relations, and special projects. She specializes in creating win-win scenarios for employees and employers alike.