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 in 2017:
Unlike traditional benefits, paid time off or PTO is a bank of hours that employees can draw from for a number of reasons, including taking a vacation, taking care of a sick child, going to a doctor’s appointment or 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 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.
There are several benefits for both the employee and the employer of using a PTO plan versus the traditional vacation and sick benefits allotment.
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 PTO policy, Arizona’s Prop 206 or how to go about incorporating both at your company, contact me at 602-903-4047 or email me at email@example.com.
Click on the links below for sample resources to get you started.
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.