Summer Blog Series (Part 3):
Paid Time Off - PTO Policies, Procedures and FAQs
The summer months typically bring about a unique set of attendance issues, from abnormally high absenteeism rates to dealing with three major holidays to the administrative burdens of an onslaught of time off requests.
Here are answers to some of the most common questions about paid holidays and other PTO to help your organization navigate these challenges and create a competitive and compliant PTO plan.
Q: What’s the average number of paid holidays provided by employers?
A: The average number of paid holidays offered by employers is 10.4 days, though some provide as few as 5 while some provide as many as 15.
Q: What are the most popular paid holidays? Are there any regional variations?
A: Virtually all companies provide the following as paid holidays:
- New Year’s Day
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
The vast majority of employers also offer the day after Thanksgiving as a holiday, and typically do the same when Christmas falls on a Thursday. Other popular paid holidays include Christmas Eve, New Year’s Eve and Good Friday, with Martin Luther King Jr. Day, Presidents’ Day, Columbus Day and Veterans’ Day closing out the list.
Additionally, nearly 40% of employers offer at least one floating holiday each year, according to (our most recent Paid Holiday Survey.) There are regional variations across the United States. For example, in Washington D.C and the border counties of Maryland and Virginia, Inauguration Day is a typically a holiday, even though it only occurs every four years (on January 20th) following a U.S. presidential election. In Massachusetts, they celebrate Patriots’ Days on the 3rd Monday in April, while in Pennsylvania they celebrate Flag Day every June 14th.
Q: Are employers actually required to provide paid federal holidays or PTO?
A: This may come as a surprise to some, but employers aren’t required by law to pay for time off on holidays. Likewise, there’s no requirement stipulating that employers must provide PTO, but it's generally an HR essential to attract and retain good talent.
Q: Should credit be granted for paid holidays that occur during an employee’s vacation?
It's good practice to credit PTO if a paid holiday occurs during someone’s vacation. For example, if an employee takes July 3rd through July 7th off work and July 4th is a paid holiday, this day typically wouldn’t be counted as a vacation day.
Q: What should be done with employees who take unscheduled leave before or after holidays?
A: The best way to deal with this problem is to forbid it as policy and enforce the rule consistently. Treat continued absences such as those occurring before or after holidays or weekends as unexcused absences and state very clearly in your policy that violators will be subject to discipline and/or termination.
PAID TIME OFF Q&A
Q: How many PTO days do most organizations offer?
A: The average number of PTO days offered by employers is 10 vacations after at least 1 year of service, 15 vacation days after 5 years of service, 18 vacation days after 10 years of service, and 20 vacation days after 15 years of service. Maximum vacation days are typically capped between 20-25 days.
Q: What are some of the differences between a traditional leave program and a PTO system?
A: Traditional leave programs compartmentalize time off for sick leave and vacation while PTO plans bank all time off into one bucket. Because PTO plans allow employees to use time off for any reason, they simplify the administrative process considerable. At the core of a PTO plan is the principle that employers aren’t managing the reasons for an absence, but rather giving employees the freedom to use their time off as they see fit. More employers are moving to PTO plans for these reasons.
Q: How much time-off should be awarded to new-hires?
A: New-hires just starting out in the business world typically receive between 5-10 days of vacation, with accrual and usage beginning within the first 30 days of employment. For companies administering a bundled PTO plan, (which include sick and personal days), 10-15 days of time off is more common. More experienced professionals usually command considerably more time-off, typically in amounts commensurate with their previous employer in most instances.
Q: What are PTO donation programs?
A: PTO donation programs are rising in popularity. They enable employees to voluntarily transfer PTO hours to fellow employees, typically those experiencing extenuating circumstances such as a personal medical hardship or one in their immediate family. When developing these programs, we strongly suggest that employers establish well-defined and documented policies around issues such as qualifying circumstances, tax treatment and transfer processes, just to name a few.
Q: How many PTO carry-over days do most companies allow?
A: While the majority of employers have a use-it or lose-it policy where unused time off is forfeited at the end of the year, there are also a lot of employers who allow employees to carry-over unused time. That said, most companies that allow carry-over of unused time also have limits. Allowing too much accrued leave could present a financial burden to employers if it compounds over several years, and accruing for this liability is usually a thorn in the side of most CFOs.
Q: Should employees be able to cash out their unused time?
A: Sometimes employers allow employees to "cash in" their accrued vacation hours at full value or at a lesser cash value (such as 75%, if allowed according to state law). There are, however, extra payouts associated with this option and employers must determine if the payment will be calculated based on the employee's current base pay and/or base pay after pay enhancement, etc. This option is by no means common, but is a nice perk to offer employees as part of your PTO plan.
Q: Is it common to pay out vacation time upon the termination of an employee?
Accrued vacation or paid time off is normally paid to employees who leave a company involuntarily, with or without cause. It’s less common for companies to pay out PTO to employees who leave voluntarily.
Q: What are the pros and cons of offering unlimited vacation time?
A: Particularly among progressive employers, unlimited vacation time is becoming more popular, at least for salaried/exempt employees. And unlimited vacation policy does have tremendous upside, providing your culture is conducive to the policy. It eliminates the administrative burden of having to track time off, and the freedom it offers employees in taking time off and is a very attractive benefit.
On the downside, the policy is difficult to administer with hourly workers and doesn't work if your organization lacks a responsible and respectful workforce or lacks the cultural stamina to value results over hours worked. This type of policy can also make it difficult to track information critical to your adherence to programs like the Family Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA).
We hope you are enjoying our four part summer blog series on PTO. If you missed our first two posts, simply click on the links below. And stay tuned for our fourth and final post, which will cover “Notable PTO Trends and Novel Approaches”.