Overview: Employers often voluntarily offer different forms of paid time off (PTO) as an employee benefit. PTO benefits are meant to improve recruiting, retention and employee loyalty. Employers offer many different types of PTO, including vacation days, personal days, sick days and holidays. Instead of providing separate vacation, personal and sick days, some employers use a PTO bank, which does not differentiate between types of time off.
Employers should clearly define the way that PTO is earned and when it can be used. A written and published policy will help manage employee expectations and allow the business to properly staff all areas of the organization. It is also advisable for an employer to have a written and published policy for defending against potential lawsuits or for evidence in disciplinary proceedings. PTO policies should take into consideration state laws on "use it or lose it" policies and termination pay.
Trends: Unlimited vacation is a benefits trends that has become increasingly popular. Vacation is considered "unlimited" when an employer eliminates caps on vacation time, and presumably, employees can take as much time off as they want as long as they are getting their work done.
Author: Jessica Webb-Ayer, JD, Legal Editor
Updated to reflect the final overtime rule updating and revising the Fair Labor Standards Act (FLSA) overtime exemption requirements, effective January 1, 2020.
Updated to reflect the Duluth paid sick leave law and the paid-sick-leave-related notice requirements in the Minneapolis Wage Theft Prevention Ordinance, both effective January 1, 2020; and to include information on the leave-related employer tax credit.
Updated to reflect changes to Colorado's Wage Protection Act Rules and the addition of the Colorado Vacation Handbook Statement.
Colorado employers seeking to indicate that Colorado employees will receive pay for vacation upon termination of employment should consider including this model policy statement in their handbook.
The DOL intends to clarify that the cost of providing wellness programs, onsite specialist treatment, exercise opportunities, employee discounts on retail goods and services, and certain tuition benefits may be excluded from an employee's regular rate of pay.
Updated guidance to reflect additional information regarding payment of vacation benefits upon termination.
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Information, resources and tools on Paid Time Off Benefits.