Arizona’s warmer temperatures have arrived and with them comes vacation season. As employees begin putting in requests for time off employers may be interested to know that taking a sick day or requesting vacation is quickly becoming a thing of the past.
In recent years, more employers are experimenting with paid time off (PTO) as opposed to the traditional vacation, sick, and holiday benefits packages. Check out these recent labor statistics showing the average amount of sick leave, vacation days, and paid time off granted by private sector employers nationally in 2017:
Unlike traditional benefits, paid time off (PTO) is a bank of hours that employees can use to cover absences such as taking a vacation, caring for a sick child or elderly parent, going to a doctor’s appointment or simply needing a personal day off from work.
Typically employers either credit the employee’s PTO bank every pay period with a specified amount of time, or front load it as a credit at the start of the year.
Example: If the employer offers:
10 paid holidays
+ 10 days vacation (2 weeks)
+ 2 personal days
+ 8 sick leave days,
= 30 paid days off per year
In this example the employee would bank 30 paid days off. Instead of these days being itemized by the employer for a specific purpose, the employee uses the days at his/her discretion.
Employers generally use one of the following two methods to distribute PTO days.
1 – Front Load
Some employers credit the full annual number of days to the employee’s account on January 1.
2 – Accrual
Others prefer the days to accrue throughout the year and deposit days each pay period.
Example of accrual rate based on 30 PTO days:
If an employer pays bi-weekly (26 pays) the employee would accrue 1.15 days every two weeks. If the employer pays semi-monthly (24 pays), the employee would accrue 1.25 days at each pay period.
When it comes to implementing a PTO plan versus of a traditional vacation and/or sick leave policy there can be several benefits for both employer and employee such as:
Unlike traditional employer-controlled time off packages, PTO banks can also present some pitfalls if not properly managed and maintained. Some of these are:
All in all, PTO is a viable option that should be considered, as it works well for many companies and can be a beneficial alternative and less of a headache than traditional vacation and sick time policies.
The following factors are ones that should be considered when designing a PTO plan:
For questions related to this or other workforce and employee benefit topics, contact me at email@example.com or 602-903-4047.
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Joanna Morrow is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU). Joanna is a senior partner at Arizona Benefit Consultants in Phoenix.