PTO Use and Rules

“I’m not sure I have my paid time off set up correctly.”

Your HR Survival Tip

PTO can be a bit confusing because it means “paid time off” but is a recognized plan that differs from other types of paid time off. A PTO plan combines the traditional vacation leave, sick leave, and personal holidays into a single consolidated account for each eligible employee. Employees are able to better manage the time off to fit their personal needs because the time off isn’t limited by the individual buckets of sick, vacation, etc.

Thanks to the paid sick leave laws, companies do have to ensure their PTO plan meets the legal requirements, including:

  • Accruals must start on the date of hire, even though you can state no usage is allowed for the first 90 days of employment.

  • If accruing, the minimum accrual is 0.0334 hours of PTO for each hour worked (1.336 hours of PTO each 40-hour week, 69.472 hours per year) and overtime hours must be included. This may be a higher rate than you planned but you must accrue at least as much as sick leave requires.

  • Maximum accrual must be at least 48 hours but it’s often more, depending on your locality and relevant paid sick leave law. On the other hand, vacation must have a maximum of at least 150% of the annual accrual. You’ll need to determine the maximum needed to keep you compliant.

  • You may not require employees to use more than 2 hours at any one time.

  • You are more limited in how you require notification of time off. You can specify personal time off must be requested 2 weeks in advance (for example) but can only request advance notice when possible from employees using PTO for sick leave reasons.

  • The entire bank of PTO hours may be used for sick leave purposes so you may not be able to use attendance for disciplinary purposes until all the hours are depleted.

  • If you are providing paid sick leave in addition to PTO, we recommend your PTO policy requires the use of any available paid sick leave before using PTO for sick time.

  • Any and all accrued PTO must either be used or paid out upon termination.

While PTO is popular with employees who rarely use sick leave, it is now less so with employers because of the added limitations from sick leave laws. Hybrid models may be better for you where you have different plans for different levels of employees. For example, a PTO plan for managers and above and individual sick and vacation plans for those below manager level.

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