Some employers are moving away from the standard vacation-day allotment and moving toward more flexible paid-time-off (PTO) policies. Under traditional vacation policies, employees are awarded or accrue vacation days based on a formula or seniority. Under a flexible (unlimited) PTO policy, salaried employees are generally allowed to take as much PTO as they choose, so long as they get the job done.
Employers considering implementing flexible PTO policies must put parameters around their policies and communicate the policies to employees.
- Consider State and Local Laws. Some states require employers to offer a certain number of days of PTO and/or require carryover of unused days. An employer implementing a flexible PTO policy should make sure it complies with applicable state and local laws.
- Consider Federal Laws. While federal law does not require an employer to offer any paid time off, certain laws, such as the Family and Medical Leave Act, do require protected leave. An employer subject to the FMLA should make sure a flexible PTO policy addresses FMLA, and the employer’s FMLA policy addresses the PTO policy. Will the FMLA leave be paid under the flexible PTO policy, or will the FMLA leave be unpaid?
- Require Approval of PTO. In order to ensure proper staffing and scheduling, an employer implementing a flexible PTO policy should require employees to have their PTO approved before use.
- Ensure Productivity. Employers should communicate to employees that taking PTO does not change performance expectations.
- Establish Timing Guidelines. Employers may wish to encourage a minimum use of PTO, and identify what they see as a maximum number of days that are generally reasonable. They may also wish to limit PTO uses during busy times.
- Reserve Right to Termination. Employers should reserve the right to change the program at any time.
Employers with flexible PTO policies may benefit administratively from not having to track PTO usage and monitory carryover and payouts, and employees participating in such policies may benefit from a sense of independence in recognition. Careful consideration must be given to the structure of a flexible PTO policy and how it is implemented.
