Changing vacation/sick/personal time off policy to accrued PTO

TKH329

We are looking for a way to convert our existing time off policy to a pool of PTO time. Currently all employees that have been employed for a year get a lump sump each of vacation, sick and personal time on their anniversary date. We would like to change it to a single pool of the same allotted time accrued over the year beginning on January 1st.

1. Right now we offer new employees, 3.33 hours of accrued sick time per month after a 90 day probationary period and 27 hours personal time. Does anyone have any suggestions on how to allow them time off that is fair? We would like to offer them benefit hours but do not feel they should accrue the same amount as an employee that has been here a year and also don't want them to have to wait one and a half to two years for a year anniversary benefit.

2. How to we adjust old employees from an anniversary date to a calander year date? At their 5 year and 12 year anniversary, they begin accumulating more PTO time. When should their accrual amounts increase?

moneyman

Addressing the switch of current employees first: Are you awarding the benefits after the year of service is performed, so that you must work one full year before you get any vacation time? And, that when those hours are put in their "bank" then they are fully earned? If that is the case then your employee who has been awarded time on this year's anniversary date has actually earned for the prior service year. When 01/01/03 rolls around, you would just need to award the hours for the anniversary date through 12/31/02. Beginning with each month in 2003, you would add the accruals. If your schedule is 10 vacation days, then that is 6.67 hours per month. Add that to your other accruals each month and no longer designate accrued time as sick, personal or vacation, just call it PTO. I like the PTO method because it really benefits the people who are never sick. We have many employee who schedule an additional week vacation because they are never sick.

For new employees, I have noticed that it is common to accrue sick and personal time only during the first service year and award "vacation" time after the first service year. I would just set a schedule/policy that shows that employees in their "introductory" period do not accrue PTO, and employees from 90-days to 1 year, earn XX hours per month, 2-5 years earn XX hours, etc. As soon as that new employees successfully complete the 90 days, they can begin accruing at the "sick and personal" rate only, then after one year it will jump up because you are now allowing for the accrual of vacation time.

If you are interested in allowing new hires a little more flexibility, I have heard of places that award time in advance of actual accrual. For example, upon new hire or beginning of the year, the entire accrual is calculated assuming that the person will stay employed through 12/31. The bank will reflect that amount and they are able to begin scheduling time. So you can take your time in the same year you accrue it instead of having to wait one full year. The problem I can see with this method is that you may have employees who will quit before the end of the year and also have taken more time than actually earned when the recalculation of accrual is performed. I would think that informing employees that adjustments will be made on the last paycheck and sending a letter to the employee telling them exactly how the last paycheck will be calculated (to be signed and returned) will afford you some protection. However, if you don't get that back signed and agreed to, I believe that you will be stuck paying for the actual hours worked during that period (since no deductions from payroll can be made without the employee's consent).

Nat

I will tell you how we switched to a similar plan and see if you can glean any valuable information from it. Here goes...

1. For current employees: any accrued but unused SICK time went into a "bank". Employees were allowed to draw from this "bank" only after they had used 40 hours of PTO time and it still had to be used for sick leave. This allowed the employees to use the sick time they had accrued but did not automatically create "vested" time or a liability on our books. New employees did not have a "bank" from which to draw.

2. For current employees: any accrued but unused vacation or personal time was converted to PTO. New employees began accruing PTO after 90 days.

3. We left all increases at the employees anniversary date. You didn't state why you wanted to switch to the Jan. 1 date. I would assume to coincide with your fiscal year. We picked a date, let's say Jan 1. and did the conversion. If someone had an anniversary date in February and it was a year in which their accruals increased, then they got the increase at that time. You could switch everyone to the Jan.1 date and then have a schedule that you looked at each Jan 1. to see who would get an increase in accruals.

Hope this information is helpful. We did our increases in 5 year increments - sounds as if you don't want employees to wait that long. My current employer increased accruals each year and we have a schedule that spells out exactly how much. I will caution you that switching to a PTO program (which I happen to like better than 5 days of sick and 5 days of vacation each year) does create automatic liability on the books. PTO time is vested time once it is earned. It must be paid out when the employee terms unless you put a forfeit clause in your policy that states something different, at least in North Carolina. You might check your state laws to see if they require something different. Our policy stated that if the employee did not work a two-week notice or if they gave proper notice and had unscheduled absences without a DR.'s note they would not be paid out.

Hope this helps!

Nat