HR Tip of the Week

Your Top 5 Paid Time Off (PTO) Questions Answered

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Many employers provide paid time off (PTO) benefits to their employees. However, with laws impacting how employees can accrue and use PTO, it's no surprise employers have questions. Here are some of the most common questions related to paid time off:

Q: Am I required to provide my part-time employees with paid time off?

A: There is no federal law that requires private employers to provide paid time off to employees. However, some jurisdictions require employers to provide paid sick leave to full-time and part-time employees. Review these laws carefully to ensure your policies and practices comply. Absent a specific requirement, employers can determine whether to provide paid time off benefits and how to structure their program. Generally, employers that offer PTO provide it to part-time employees on a pro-rated basis (for example, 10 days for full-time employees and five days for part-timers).

Q: Do I have to pay an employee for accrued, unused paid time off at the time of separation?

A: While some states do not have payout requirements, others handle pay for unused PTO in one of the following ways:

  • Employers must pay employees for accrued, unused vacation/PTO at the time of separation; or
  • Employers can exclude unused vacation/PTO from final pay only if they have a written policy that explicitly states that employees will not be paid for any accrued, unused time upon separation.

Note: Most paid sick leave laws don't require employers to pay employees for accrued, unused sick time upon termination. However, if you bundle all leave, including sick leave, into a single PTO policy, you may be required to pay out the entire unused portion of PTO depending on your state. Check your state law to ensure compliance.

Q: Am I required to grant additional paid sick leave once an employee has used all of their allotted time?

A: Generally, no additional paid sick leave leave is required once an employee exhausts their allotted time. However, depending on the circumstances, the employee may qualify for leave under a different law. For example, the federal Family and Medical Leave Act and similar state laws require employers to provide unpaid leave to eligible employees for specified family, medical, and military reasons. Check your applicable laws to ensure compliance.

Q: Should I have a waiting period before an employee can use PTO? If so, how long should it be?

A: Some employers choose to impose waiting periods before an employee can use paid time off benefits. When establishing a waiting period, consider what makes sense for your business and the potential impact on morale. Note: Most paid sick leave laws require that employees begin accruing time off on their first day of employment and allow them to start using their time after 90 days. Check your applicable law to ensure compliance.

Q: We find that offering paid time off to our employees instead of paying overtime is more cost-effective. Are we allowed to do this?

A: This practice is commonly known as "comp time" and it is prohibited in the private sector. Non-exempt employees who work more than 40 hours in a workweek must receive overtime pay. Employees cannot waive their right to overtime, even if the employee would prefer comp time instead.

Conclusion:

When drafting, implementing, and enforcing your paid time off policies, consider what makes sense for your business and comply with all applicable laws.

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