Pay out of Unused PTO
pattimac
4 Posts
Our policy has always been that if an employee terminates they will lose any unused PTO time. Nebraska recently settled a court case against such a policy so we need to come up with a policy that will lower our risk of paying out unused PTO. We understand that sick leave could be forfeited but are concerned if we add sick leave and reduce the PTO time, we will have employees using sick leave for vacation and calling in at the last minute for sick leave when it could have been a planned vacation day.
We are a non-union employer with approximately 120 employees located in Nebraska, Colorado and Maryland with the possibility of adding New Hampshire and New York. We are very customer service oriented with a call center that comprises close to 75% of our employees.
I am very interested in finding out what other companies use for their PTO/sick leave policy and how many days do you give your employees for such events. We currently max out at 25 days after 10 years of service and start at 15 days for the first 2 years of service. It then goes to 17 days until your 5th year of service and then it increases to 21 days. We have no separate sick leave, personal days, etc. as every day of time off goes to PTO in 4 hour increments.
I also need to know your policy when two employees want the same day off and when they can put in for days off. We have always been a small employer and have never had this problem. We are now in a large growth mode and our small "family" atmosphere is developing into big business that will need to be run by rules laced with non-discrimination issues.
I appreciate your input.
We are a non-union employer with approximately 120 employees located in Nebraska, Colorado and Maryland with the possibility of adding New Hampshire and New York. We are very customer service oriented with a call center that comprises close to 75% of our employees.
I am very interested in finding out what other companies use for their PTO/sick leave policy and how many days do you give your employees for such events. We currently max out at 25 days after 10 years of service and start at 15 days for the first 2 years of service. It then goes to 17 days until your 5th year of service and then it increases to 21 days. We have no separate sick leave, personal days, etc. as every day of time off goes to PTO in 4 hour increments.
I also need to know your policy when two employees want the same day off and when they can put in for days off. We have always been a small employer and have never had this problem. We are now in a large growth mode and our small "family" atmosphere is developing into big business that will need to be run by rules laced with non-discrimination issues.
I appreciate your input.
Comments
Been there done that, feel your pain. I believe the best way to handle that situation is by making sure your PTO and sick leave policy is two separate policies.
If your handbook states you must for example give a two week notice or you do not get paid accrued PTO your are protected. The DOL does not rule on policies that are not mandated by law. Since vacation or PTO time in not a mandated benefit you can do as you wish providing you cover yourself in two areas [1] make sure it is spelled out in your handbook [2] administer it the same every time without deviation.
As far as sick days go, we give 3 each year and if they are not used by the anniversary date we will pay the EE for not using them. This encourages EE's not to just take a sick day because they have one.
As long as you have a "bona fide" sick leave policy you can deduct pay from both hourly or salaried EE's. You simply have to live with the fact that some EE's will abuse the policy and call in sick at the last minute and use the sick day. You can keep this from becoming an epidemic by requiring a doctor's excuse after two days of being absent from work for sickness regardless of whether or not they in concurrent.
Good luck - SteveG
The Nebraska Wage Payment and Collection Act says "wages" means
"compensation for labor or services rendered by an employee, including
fringe benefits, when previously agreed to, and conditions stipulated have
been met by the employee, whether the amount is determined on a time, task,
fee, commission, or other basis."
Further, Section 48-1230 says that if vacation pay is earned or accrued so
that the employee could have taken paid vacation before resigning or being
terminated or would have been entitled to take paid vacation if she remained
employed, those amounts must be paid to her within two weeks of termination
or on the next regular payday, whichever comes sooner.
At our company, we feel it is clear that while the articles written about
this decision refer only to "vacation", it would be a pretty weak argument
to say that it does not include sick leave. If an employee were to
challenge it in court, I am certain that sick leave would fall under this
ruling.
Our paid time off policy is as follows:
Employees receive 40 hours of vacation time at six months of employment, and
then 40 hours of vacation and 24 hours of sick leave at one year.
2 years - 7 years: 80 vacation/24 sick
8 years - 20 years: 120 vacation/24 sick
20+ years: 160 vacation/24 sick.
We allow employees to accumulate sick leave up to 240 hours, at which time
it caps and is paid out on anniversaries unless an employee uses some of it
during the year.
We do NOT allow vacation to accumulate year to year; we will cash out up to
40 hours worth and the rest is lost. We have found that employees will use
down to at least that 40, and that keeps them from accumulating so much
time. We are staffed at levels that allow more than one employee to be on
vacation at once, although supervisors' vacations require a bit more
planning. We allow vacation to be used in increments as small as 2 hours.
We request employees to provide 24 hours notice for one day's vacation and
one week's notice for one week's vacation but make allowances for family
emergencies. We are in manufacturing, with approximately 80 employees in
central Nebraska.
I know this is completely off the point of the original thread here, but this issue is really a huge bone of contention with me. As you pointed out the Nebraska Statute: "The Nebraska Wage Payment and Collection Act says "wages" means
"compensation for labor or services rendered by an employee, INCLUDING FRINGE BENEFITS ...Further, Section 48-1230 says that if vacation pay is earned or accrued so that the employee could have taken paid vacation before resigning or being terminated or would have been entitled to take paid vacation if she remained employed, those amounts MUST paid to her within two weeks of termination or on the next regular payday, whichever comes sooner." I find it repulsive when the government dictates how a company handles the issue of unused vacation. Many companies feel that payout of unused time is appropriate and I can respect that - although I personally feel that vacation is a benefit provided by the company, for purposes of encouraging rest and relaxation WHILE STILL EMPLOYED... I do not beleive we should treat this benefit as cash compensation that is due the employee upon termination. But my main complaint is that the government wants to dictate for the company what its policy ought to be. Considereing the logic of the above Nebraska statute and its view of "fringe benefits", are we also to pay out unused medical premiums if the terminating employee didn't utilize any medical services? Or pay out life insurance premiums if they were so kind as not to die while employed? If the answer is "NO", why are we treating granted vacation any differently? The issue of GOVERNMENT MANDATED payout of vacation/PTO is something I feel all HR professionals should vigorusly oppose.
Several months ago I posted on a thread about our PTO plan. When an employee terms we payout 45% (long story as to why 45%) of their PTO balance. When I shared this with the forum another member posted that they felt our company was stealing from our employees. Though I felt his comment was a little harsh and I didn't particularly agree, I did understand his point.
I feel our percentage is no longer relevant (the percentage was decided in 1998). However, I can see why a company would not want to payout sick leave. In our case I don't have a better option.
I guess it really comes down to how your plan is written and your company culture. If your company encourages employees to take the time off to recharge their batteries, they will do things like limit time rolled over, and discourage people from not taking time off. That company would have every reason NOT to want to pay out any leave time. They wanted you to use it, not save it for when you leave.
However, if your company says it gives you lots of leave time and then lets it accumlate forever and frowns on people taking vacation time (it is always a bad time to take vacation at some companies), then it is only fair to the employees that they at least be compensated for the benefit they never actually received.
It is too bad though, that the government feels the need to step in. Don't we have enough employment regulations? If Nebraska is passing such a law, it is only a matter of time before someone introduces it here in Kansas (if they haven't already). Ahhh. The joys of HR.
Nae
Whether vacation time is deemed "accrued", "earned", "granted" or whatever, it shouldn't make a difference, I look at is as a semantics game. Vacation is a benefit that the employer either provides employees or it doesn't. There is NO law that stipulates companies have to provide any paid time off to their employees; it is strictly up to the company. If the company chooses to payout unused time, so be it, and many do. However, the government has no business dictating what fringe benefits I choose to provide my employees, and has no basis to mandate that any unused vacation must be converted to cash compensation, ESPECIALLY to a terminating employee - leave that decision to each organization. I know I am preaching to the choir (you) on this, but it just "sizzles my grits" as they say down here. As you pointed out, we have enough regulatory issues to deal with, stay out of the decison-making arena when it comes to benefit policy.
In Canada maternity leave is a year. In the UK if you work 1 year you automatically get 4 weeks vacation. In Canada also you have to pay the employees 4% of their total wage for vacation or as they call it "Holidays" and if they work 5 years they get 6%. Plus they have at least one paid holiday off a month. In my office in Hong Kong they received a month off for Chinese New Years and then they got a year end bonus for 1/3 of their salary. Don't even try to terminate someone in a foreign office you will pay big bucks for severence or redundance pay as they call it.
Right now the USA is looking pretty good to me. I deal with 7 foreign countries and we are the most employer friendly of any of them.
Did you see that in San Francisco it is now Mandated sick pay? That is effective February 5, 2007. It is on the APA site in their newest paystate update. Employees will accrue one hour of paid sick pay for every 30 hours worked with a cap of 40 accrued hours for small business's with 10 or fewer employees and 72 hours for all other business's and it can carry over from year to year....which state is next?
Maybe we should fire everyone in the government and start over from scratch.
Until then we have to find ways to deal with the rules. My PTo into 401K saves the company bucks because we do not have to pay matching taxes on the money because the employee does not pay taxes on 401K money. Saves us over payouts.
Shirley
"Maybe we should fire everyone in the government and start over from scratch."........that's the best suggestion I've seen presented in this forum in quite some time. Been thinking that exact same thing for years now. Our city is experiencing a bit of government revolt right now...the city council recently passed a 1 cent sales tax increase and there is now a petition floating that would change our form of government from a mayor/city manager/town council format, to a strong mayor/ city council format (the details of the differences are boring and irrelevant). The whole reason the petition was filed is to force ALL councilman and the mayor to have to run for re-election, and obviously be faced with the possibility of being thrown out of office......which, I wish we could do with all of Congress right now. It just might make them a tad more accountable to their constituency.
Giving the option of sending the value to the 401k sounds like a nice alternative.
Edit: I spoke too fast. I read your other post below and see the conversion table. How do you allow one-time contributions different than what the employee signed up for during your enrollment/change periods?
Shirley
The employer tax savings also threw me. 401k deferrals are FICA taxable, meaning the employer does not save on FICA match... I thought maybe I was nuts so I looked it up on the IRS website.
Is there a way around this?
Shirley
You have to have your TPA write in a profit sharing plan which is different from the matching contributions.
It is still under the 125 plan for government purposes.
Shirley
When I read the Dilbert cartoon on Sunday regarding Alice having 19 days of vacation left at the end of the year, I thought of this posting of yours from Fri. Just in case you haven’t seen it, check it out. Consider it a benefit provided by ME, for purposes of encouraging rest and relaxation.
Toto x:D
I saw it and laughed my arse off. Many times, Dilbert just nails it on the head with its workplace observations.
We just overhauled our PTO policy. I am announcing the changes at our December staff meeting.
We do not pay out unused PTO, however, we do allow them to roll a portion of it over to their 401K account.
We do pay out the PTO for a terminating employee, but only what is currently in their bank.
We previously allowed 80 hours rollover from year to year, we are no longer allowing that.
Our new plan says :
Purpose: To provide employees with a flexible paid time off policy that combines vacation and personal time benefits into one, more easily administered benefit.
Practice: Personal Time Off:
Effective January 1, 2007, the PTO policy will change as reflected below.
For all employees, PTO is earned from anniversary date to anniversary date for use in the following 12 months. PTO is not accrued but is credited in full on an employee’s anniversary date.
Upon separation from the Company, PTO will be paid to the employee calculated on the sum of the total unused amount remaining in the employee’s PTO bank at the time of termination.
PTO credit does not stop when an employee is on a paid or unpaid leave of absence.
Unused PTO will not be carried forward to the next year. However, a portion of the unused PTO may be put into your 401K account according to the 401K/PTO conversion amounts below.
All PTO used should be scheduled and approved by the department supervisor/manager at least 1 week in advance, when possible. PTO may be used in 30 minute increments, with 30 minutes being the minimum amount that can be used.
Under the new PTO policy PTO will be earned as follows for regular full-time employees working 30 or more hours/ week:
Length of Service PTO Received PTO amounts /Converted to 401K
1 – 4 years 10 days(80 hours) 40 hours (5 days)
5 - 9 years 23 days(184 hours) 80 hours (10 days)
10 - 19 years 28 days(224 hours) 120 hours (15 days)
20 + years 30 days (240 hours) 160 hours (20 days)
Employees working 21 - 29 hours per week will receive PTO at 50% of the earned amount listed above. Employees working 20 hours or less per week are not eligible for Paid Time Off.
All PTO received and used will be tracked through the payroll system, and all used PTO must be noted on hourly employees' time sheets in order to be paid. Salaried employees are responsible for keeping supervisors informed of all PTO used. Supervisors and Managers are responsible for making sure the correct PTO is entered into Unitime for each employee.
When two people in our company want the same day off, we usually go with whomever asked first. If they both ask at the same time than we would go with seniority. Very seldom do they both ask at the same time, so usually whomever asks first works. Than we tell the second person, I am sorry but that day has already been granted to another employee and we cannot allow both of you to be gone at the same time.
Shirley
Now, you may want to limit the amount of time an employee can carryover from the end of your fiscal year to the next. You could put it in a long term PTO bank for illness only. Or they could loose it. This limits the amount of time a person is paid at termination/retirement.
The other issue can be controlled if you allow pay out of a % of the accrued/earned time off at termination.
You may want to talk with NE labor dept about their law to make sure you are interpreting it correctly. When I took this job I called the CA Labor folks and found out that we were handling our CA employees' term payment of vacation all wrong (to employees' benefit) and I got this corrected. There are usually "ways around" the law that can benefit you.
Let me know your email and I will send you my old companies PTO policy, which is really pretty simple.
E Wart
[email]ewarthen@newcombspring.com[/email]