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How to Develop a Paid Time Off Program

paid time off program

Paid Time off for the Win

If there were an action companies could take to improve their employees’ mental health, lower their stress, and increase their productivity, all companies would take that action at the drop of a hat…right? Not necessarily. Offering paid time off greatly improves both productivity at work and job satisfaction, and yet the United States is the only advanced economy that does not have federally mandated paid vacation, according to the Center for Economic and Policy Research.


The “Great Resignation” of 2020 and 2021 highlighted the importance of a better work/life balance for employees. According to a QuickBooks survey, three-quarters of American workers say it’s highly important for employers to provide paid vacation time. Offering and encouraging your team to use paid time off (PTO) will positively affect worker productivity and reduce turnover. 


Always review state and federal labor laws to ensure your PTO and vacation programs comply with regulations. 


In this blog, we’ll dive into helpful questions and answers so you can implement the right PTO program for your company.

Is PTO Required By Law?

In the U.S., neither federal nor state law requires paid time off. However, most companies do offer benefits, including paid vacation time, to attract and retain top talent. According to Zippia, 76% of private industry workers receive paid vacation time.


Does My Company Need a Paid Time Off Program?

If your company offers paid time off, but you’ve not yet documented and rolled out the program, it’s important to do so. A clearly written program eliminates confusion and creates a trusting work environment. 


Examples of what to include:


  • Eligibility
  • PTO schedule
  • Benefit amount
  • Carryover and max accrual information
  • Leave requests
  • Payment upon employment separation


How Is Paid Time Off Typically Earned?


Your company should establish how time off is earned. One common way is through accrual, meaning a set amount of time is earned each pay period. Another method is to provide a grant on a specific date. Additionally, allowing more time to be earned based on tenure will reward loyalty. This LinkedIn article provides a general sense of how much PTO is normally offered by companies, and how it is earned, based on specific industries.


Is “Use-It-Or-Lose-It” Allowed in My State?


PTO can be influenced by state laws. Most states allow employers to rescind unused time. If you want to encourage employees to take time off — and avoid substantial payouts when employees leave — consider a use-it-or-lose-it program. It is, however, important to note that California, Colorado, Montana, and Nebraska consider PTO a form of earned wages and therefore prohibit a use-it-or-lose-it policy from being implemented.


No matter what you determine is best for your company, it’s important to explain what happens with unused time so employees can take it before it expires. 


Can I Tell My Team Members When to Take Paid Time Off?


Establish when employees can take time off if having multiple people out of the office at the same time would create a problem for your company. Seniority, rotating holidays, or a first-come-first-serve approach can help manage time off. Furthermore, creating a practice of advanced scheduling will allow managers and employees to prepare for the absence. 


Does My Company Need to Payout Accrued Time Upon Termination?


The short answer is, it depends on where your company resides. Several states require payment of accrued time when an employee is terminated. Most states leave it up to the company to establish what happens to the accrued time, making a clear program especially vital.


Help! Who Will Help Create a Paid Time Off Program for My Organization?


Employment laws in the U.S. can be a challenge to follow. Writing and implementing a straightforward PTO program requires ongoing knowledge of your state’s ever-changing statutes. Cura HR ensures company policies and programs align with your organization’s business model and are compliant with state and federal laws. Our seasoned team of human resource experts are adept at identifying and deploying the best solutions. We’d love to learn about your organization and how we can leverage HR best practices to take your business to the next level.

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