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  • Travis Campbell

    Vacation / Sick / Paid Time Off

    Here are a few things to keep in mind when planning out your office's leave policies.

    1) Federal has almost no rules, and most states have minimal rules. ALL of them tend to state that your office manual is the rule.

    2) Some states like WA and CA have mandatory sick leave. However, this CAN be included into your PTO as long as the minimum is at least the state requirement amount.

    3) PTO (paid time off) is a single account of both sick and vacation time. It is often better to do because you have a single number to track, so easier accounting.

    4) Sick time abuse – many employers notice that employees abuse their sick time. Oddly enough, when you combine it with their vacation time into PTO, it gets abused less because employees don't want to “waste” their vacation time.

    5) Accrual can be either per paycheck or per year. Most payroll software will keep track of this for you easily.

    6) End of year – you can choose whether to pay unused time at the end of the year or not. My suggestion is not, and pay it either as used, when they get a raise, or upon resignation. But that is a good conversation to have with your CPA, the only real reason to pay it out is because of taxes.

    *7) Separation – I have not yet found a state that requires you to pay leave time when employment ends. So here is the biggest thing that can help you avoid firing people and unemployment: ONLY pay unused leave time when an employee VOLUNTARILY quits. Therefore the employee has a very good financial reason to just quit if the job is not working out instead of forcing you to fire them. If they give you a letter of resignation, they are not eligible for unemployment.

    8) Wellness bonus – some employers give a bonus if an employee does not use sick time all year. Often this is a percentage increase.

    9) Replacements – a smart idea is to have an employee be responsible for finding their replacement if they have to be on vacation while the office is open. This is highly useful if you find your employees keep trying to take off during your busiest days. Employee found replacement means NOT the temp agency.

    10) Extended sick time – it is a good idea to specify when an employee is required to get a doctor note before coming back to work. Most common is 2 days. This also helps prevent sick time abuse.

    11) Return from extended sick time – I highly recommend requiring a doctor's note stating BOTH the employee can return FULL time and WITHOUT restrictions. Most of us do not have offices large enough to compensate for having an employee with limited ability.

    12) Non-use of PTO. Remember, PTO usage is voluntary, the employee can choose to use it or not. Even if they have to be out sick, non-use of PTO just means their time off is unpaid. This most commonly happens when an employee is out of PTO and needs to be off for any reason.

    12) Minimum usage – unless restricted by state law, you can set a minimum amount of PTO to be used at a single time. It can be helpful to set that minimum at a half or full day so that you can find someone to fill in for that time off (since it is almost impossible to find a temp for just a couple of hours).

    13) Eligibility – unless defined by state law (sick time), you can set up whatever requirements you want for an employee to be able to earn PTO. Most common is X months having worked and X hours per week. (Example: after 3 months of working 32 hours/week, you are eligible to start accruing PTO). Most businesses do not give benefits to part time employees (<32 hours).

    Samantha Leonard

    Thanks for sharing! These important areas are often misunderstood.

    Best thing to do is have this clearly outlined in your employee handbook that states your practice guidelines, compensation and conditions for holiday, PTO, sick days etc. This can help you avoid those awkward conversations and upset employees!

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