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What You Should Know About PTO And Vacation Pay

By March 19, 2012 February 19th, 2015 No Comments

iStock_000017050806XSmallPaid Time Off (PTO) which is considered “earned time”, has become a more common employee value proposition offered by many employers. Similar to an employee benefit, a PTO program offers blocks of time (hours), as opposed to days off. Vacation time, sick leave, holidays, short-term disability and personal leave are all rolled into one block.

PTO programs help organizations get a handle on absenteeism and the resulting lost productivity by empowering employees and making them responsible for their own time off. Oftentimes, what would have been an unscheduled absence gets converted to scheduled time off.

These programs are advantagous to employees, who have more flexibility and control over their own time, as well as to employers, who are able to attain a reduction in payroll expenditures when compared to traditional time off.

Employees need a break once in a while, and some employers’ plans offer a number of days for each form of PTO, and other employers’ plans may specify one set amount of paid days off that can be used at employee’s discretion.

The way PTO is structured may vary. Some employers base the amount of vacation days on the anniversary of the hire date Some employers have a calendar year anniversary. Regardless of the method, the structure should be documented in an employee manual.

A trend with PTO is that many companies who used to allow employee to carry over unused days are now not carrying these days over from year to year. Some municipal employees used to accumulate PTO for years, but now even public sector policy has changed. While an employee may not be eligible to receive cash for unused days off, if the employee leaves the company, the company may be required to compensate the employee for that time. Some organizations will prorate the PTO for the number of days of service accrued by the associate.

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