Paid time off (PTO) is a fantastic benefit that employers provide for their employees. In fact, recent studies show that 65% of business owners provide PTO benefits for their employees. Employees with time off benefits have higher morale and better work-life balances, which increases employee retention. So, it’s no wonder why employers choose to give their employees time off throughout the year.
Many employees enjoy the freedoms they get with time off benefits, but there are times when employers must manage time off consumption. For instance, it’s especially common for employers to restrict PTO during busy seasons or require employees to use their time off during slow periods. Although this might cause the employee inconveniences, an employer has the authority to dictate how and when PTO is used.
Federal and State PTO Compliance
Currently, the FLSA does not require employers to pay for time not worked, which includes vacation, sick leave, or holidays. Therefore, they give employers complete control over the development of their time off policies. All in all, employers can choose accrual rates, total time off balances, rollover rates, and more. They can even require employees to use time off when needed. Here are some general things to know about vacation time/PTO:
1. Employers may provide vacation time and then later require that it be taken in a specific way or on a specific day.
2. A private employer may require exempt staff to take a forced vacation day or reduce their accrued vacation time for either a partial, or a full day’s absence, so long as the employees receive an amount equal to their guaranteed salary for the time
2. A private employer may require exempt staff to take a forced vacation day or reduce their accrued vacation time for either a partial, or a full day’s absence, so long as the employees receive an amount equal to their guaranteed salary for the timeLore Law Firm
Although employers have much flexibility when creating their PTO policies, they still must comply with state regulations. Many states, including New Jersey, California, Connecticut, Oregon, and Vermont have strict time off laws in place. Employers must not only comply with federal law, but they must also comply with state law. As a rule, the employee is always protected by the legislation that is most favorable to them. To stay compliant, it’s best that you check with the Department of Labor (DOL) and state government websites for the latest information.
Requiring Employees to Use Time Off
Employers can require employees to use vacation time, but they still must comply with state rules. Here’s what the DOL had to say about PTO requirements from a federal standpoint:
[s]ince employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s). Therefore, a private employer may direct exempt staff to take vacation or debit their leave bank account . . . , whether for a full or partial day’s absence, provided the employees receive in payment an amount equal to their guaranteed salaryUS. Department of Labor
Forced vacation is a common practice during economic downturns or seasonal declines. Employers are typically discouraged from requiring an employee to use their vacation hours or restrict the time they can take off. This is mainly due to the fact that each state has its own policies and may even have legal requirements regarding the use of employee time off. California, for instance, indicates that employers must provide a 90-day advance notice for mandatory PTO. Having said that, it’s possible to require employees to use PTO; however, employers must ensure that they’re complying with state policies.
Please note that employers with 500 or fewer employees should review the Families First Coronavirus Response Act (FFCRA). Requiring employees to use PTO before letting them use their paid sick leave benefits is not allowed.
Restricting Employee PTO Usage
A majority of employers give employees the freedom to take time off whenever they want. Giving employees the ability to take off when needed is especially beneficial for the overall health of the company. It is a great way to keep employees satisfied, improve morale, and heighten employee retention. With this understanding, you would think that employees can go on vacation whenever they please. Although that is usually true, employers may restrict an employee’s time off requests from time of time.
Even though it comes with downsides, employers sometimes choose to restrict an employee’s PTO usage during peak seasons. An employer may have to restrict someone’s time off request if their absence could create hardships for the company. As long as the employer doesn’t restrict the employee based on discriminatory reasons, the employer can place constraints on an employee’s PTO usage.
Creating a Solid PTO Policy
As stated above, employers can create their own time off policies; they just have to ensure they’re in compliance with state and federal laws. Employers should find ways to clearly map out their time off policies so employees understand exactly how the time off policy works. Employers are advised to review their policy with an HR representative.
Here are some tips to creating a time off policy:
- Implement a probationary period so employees cannot take time off right away when they start employment with the company.
- Choose an acceptable accrual rate that aligns with your business practice. Some employers choose a yearly accrual rate while others choose bi-weekly, semi-monthly, hourly, daily, or weekly.
- Let employees know when they’re supposed to submit time off requests. This helps the employee understand that they must give the manager enough time to plan for their absence.
- Figure out whether you want to cap vacation hours or if you want to roll over their hours.
- Outline sick leave rules (if applicable– varies by state).
- Let employees know if they have paid or unpaid holidays along with their vacation hours.
- Choose the amount of time off an employee earns. Will employees all start with the same amount of time off? Do employees get more time off on their anniversary?
- Be transparent with employees about situations where you may or may not require the employee to use their PTO.
Creating a thorough and transparent time off policy will greatly benefit your business. Employers should transcribe time off policies into their employee handbooks with the help of an HR expert. You want to make sure that you hit important points and stay compliant with the law. Make sure to map out every detail so employees can digest your policy with ease. Many employers invest in a time tracking system like Timesheets.com to track their employee’s time off. Supervisors can manage employee time off with accrual calculations, along with an intuitive time off approval process. The math is done for you, so you never have to calculate accruals yourself and worry about human errors. It’s an easy-to-use system that will reduce payroll costs and keep your business protected.
Ready to get started with Timesheets.com?