Paid Time Off Banks

Tuesday, October 12, 2010

While neither a new nor a novel concept, Paid Time Off Banks (PTO) are one way to address the frustration of dealing with separate accumulators for vacation, sick, and occasional time off needs. Consider the employee who has exhausted their vacation time but still needs time off, which does not fit into the sick time category. Therefore, what happens, they call in sick for a day or two to deal with some personal issue. Now the organizational has an employee who has technical abused the company’s sick leave policy by “falsely” declaring they were sick, when in fact they were not. Does this happen, of course, it happens, even in the best of managed companies. Clearly, the employee feels compelled to take the time off, and clearly, the employee is willing to technical break the company’s policy. Paid Time Off Banks removes the need to silo times into buckets, which require excessive managerial control while providing no flexibility.

As with any employee benefits program, there is a need to balance the requirements of the employer and employee. As an employer, I need employees to come to work, stay at work, and focus on the work of my company. As an employee, I have to deal with sick children, an elderly parent, an ill spouse, and my own healthcare. I also have to deal with parent-teacher conferences, time to re-charge and refresh my physiological, emotional, and metal state of mind. Traditional vacation, sick time, holidays, and personal days off allocate time into separate and indivual buckets. Often time from one bucket cannot be used for the purposes of another bucket, e.g., sick and vacation time usually do not interchange. So, employees are forced to abuse the system by inappropriately misusing time from one bucket. They run out of vacation or personal days ands use suck time instead. In the long run the employee actually use more time that necessary.

How do you know if a PTO program is right for your organization? Is there real or perceived time off abuse in your organization? Does your organization work non-regular schedules such as a hospital, nursing home or educational facility? Are employees asking for exceptions to vacation, sick leave, holiday, and other time off policies?  PTO programs provide employees with flexibility while allowing employers to control how much time used and under what conditions, without micro managing the reason for the absence.

Another advantage of PTO programs is they help to manage unscheduled time off. PTO programs do not give the employee free license to take time off without first obtaining approval. Nothing prevents the organization from requiring that time off has to be pre-scheduled and pre-approved, except for emergencies.

Furthermore, employees are expected to manage their time off within the allocated limits, just like traditional time off processes. If the employee uses all of their time in the PTO bank there are just as much out of time as in a traditional time off program. The difference is that the employee is not compelled to falsify the reason they want off. In fact, most PTO systems do not require a reason, merely managerial approval to take the time and have the accrued time av available to take.

Moreover, at least one California court, the Court of Appeal for the First District of California ruled that use of partial paid days off did not “jeopardize” an employee FLSA exempt status.

Lastly, PTO is normally accrued on a period-by-period basis rather than being granted as a lump sum block on January 1 of each year. Thus, the employee is required to manage their time to ensure that sufficient time is available for a one-week vacation or a 5-day recovery following outpatient surgery. Since the time is accrued, when the employee terminates, the employer is only paying out the earned time and not the entire 2 or 3 weeks.