Practice Pointer: Effectively Managing Paid Time Off Year-Round

November 15, 2024

A common question that seems to pop up around the holiday season is, “Can employers limit or require the use of paid time off?” Employers tend to see an influx in paid time off (PTO) and vacation time requests this time of year which may cause disruptions in the workplace such as staffing and operational shortages. End-of-year is a time when employers must balance employees who are granted PTO while maintaining business operations. As such, employers cannot always accommodate every employee’s request, which can result in denied accrued vacation time requests, disappointed employees, and the need for employers to improve the process for the next holiday season. So, what can employers do to avoid this predicament year after year?

Paid Time Off, commonly referred to as PTO, is an all-encompassing benefit that includes personal days, sick time, and/or vacation time. Generally speaking, employers can force employees to use their unused PTO; this approach can have both positive and negative impacts on a business and it’s essential to approach this topic with careful consideration and sensitivity. However, if employers want happy, healthy, and productive employees, they should encourage the use of their accrued PTO throughout the year. The most successful approach is a combination of clear and consistent written paid time off policies and a company culture that allows employees to use their accrued vacation time.

Federal Law and State Regulations

Federal law does not require private employers to provide paid time off, however, a growing number of jurisdictions take a different approach. There are a multitude of cities and states which require employers to provide paid sick leave and the details of these policies vary greatly based on the statute. Provisions like accrual rates, covered purposes, and waiting periods are examples of the potential differences. In addition to paid sick time requirements, many states have specific rules and restrictions on paid vacation if it is offered, such as carryover provisions and PTO payout laws that require employers to pay employees unused accrued paid vacation upon termination. Some states, including Illinois, Maine, and New Mexico, have regulations in place that require employers to provide paid time off that can be used for any reason, including vacation time. So, the layers of the laws can be tricky.

How a Clearly Written Policy Can Help

To balance state paid time off requirements while ensuring employees are using their paid vacation time, the goal is to have a clearly written company policy that is widely communicated, understood by managers and employees, and equally and fairly enforced throughout the organization. Employers should make sure that their written policy is not overly restrictive to allow employees to reasonably use their accrued paid time off. Employers should also be aware of requirements they must meet when setting restrictions based on the location of the employee. For example, in California, employers must provide a minimum of a 90-day advance notice when requiring exempt employees to take mandatory PTO.

To ensure employees are using their accrued paid time, employers could require that they use a portion of their paid time off (for example, half of their total balance) by a certain point within the year. Requiring the use of paid time off during the business’ annual shutdown or slow season is another option. It is permissible to require employees to use their paid time off during these periods, so long as it is done in accordance with sick time law requirements and is administered consistently. The policy should include all the details regarding how paid time off is awarded, how it may be used, when paid time off must be used by, as well as how unused and accrued paid time off is handled at the end of the year and upon separation of employment.

Create a Win-Win

Paid time off is a valuable employee benefit that can enhance job satisfaction, reduce stress, and improve overall well-being. However, even in organizations that offer an unlimited PTO policy, many employees hesitate to use their paid time off for various reasons, including fear of falling behind, lack of adequate coverage, or a culture that discourages taking time off. Instead of forcing employees to use their paid time off, consider implementing written policies and practices that encourage its use, such as:

• Lead by Example: Managers should model a healthy work-life balance by taking time off themselves.

• Regular Reminders: Send periodic reminders about how much unused PTO employees have to both the employee and to their managers and encourage employees and managers to work together and to plan ahead to avoid rejected requests.

• Adequate Staff: Ensure sufficient staffing to cover workloads when employees are out. Encourage team members to coordinate their time away so everyone receives their preferred week off.

• PTO Carryover: Allow employees to carry over unused PTO into the following benefit year. Employers may be able to set a deadline for carryover PTO to be used, depending upon the state.

• PTO Bonus: If demand is too high for a particular week or month, consider offering extra time off rewards for delaying PTO usage.

The Bottom Line

Employers have many tools in their toolbox to manage time off. By creating a supportive environment that values work-life balance, they can encourage employees to enjoy their vacation while still balancing the needs of the organization. From a managerial standpoint, if an employee feels that they are too busy to step away for a few days, consider helping them prioritize their workload and encourage them to take time off. Don’t delay in outlining your organization’s paid time off policies or communicate holiday time-off expectations. Remember, it’s reasonable to ask employees about their time off plans from a department planning perspective, and an employee well-being standpoint. We all need time away from work to come back refreshed, rejuvenated, and ready to tackle new challenges. That’s a win-win for everyone.

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