Considerations for Choosing the Right PTO Policy for Your Business

February 28, 2017・4 mins read
Considerations for Choosing the Right PTO Policy for Your Business

Let’s start by understanding: What is PTO? Paid time off (PTO) is a popular benefit among employees, and if used properly, it can benefit both the employer and the employee. While large companies seem to have an advantage in terms of flexibility and resources when it comes to offering this benefit, small and mid-size companies also have an opportunity to create a PTO policy that helps them stand out as the employer-of-choice. 

A wise business owner creates a policy that will help to grow and sustain the company. Here are three considerations for choosing the right PTO policy for your business:

1. Legal considerations

The first step is to find out what is required by the state in which your business is based. These days you also need to look at city and county ordinances and regulations. More and more local governments are creating laws that affect the decisions of business owners creating PTO policy. Numerous state laws have set requirements for time off – especially sick leave. Make sure you are in compliance with any local and state laws and regulations when you create your policy.

2. Consider your priorities

Now consider whether your business is seasonal or whether it is consistently busy throughout the year. Do you have enough employees to back up every position if someone is off work? Are you in an industry that is competitive for talent? This information should factor into your PTO policy. In addition, you may decide that key employees who drive your business deserve more PTO incentive than other employees. Being mindful of this fact will help you retain people who are vital to your success. 

Do you want to offer unlimited PTO? A 2015 blog on The Huffington Post referred to unlimited PTO as a publicity stunt. The blog noted that employees at large companies with a highly competitive environment are unlikely to take weeks and weeks off from work. Consider whether that would be true for your company.

3. Decide how to enforce your policy

You may think that once you’ve created the policy, your work is done. It is important, however, to make sure that you have specific guidelines for enforcing your policy and that all managers are on the same page. Putting your policy down in writing will avoid confusion and prevent discrimination or favoritism.

Other considerations

Employee input can be a valuable part of your policy. Employees who feel they have a say in their benefits feel more valued. Banking PTO is a good way to give employees more control and make them feel more included in business decisions. 

While some companies prefer a “use it or lose” philosophy when it comes to PTO, exchanging PTO for cash is another concept that has gained popularity. Employees who tend to accrue a lot of time may appreciate the opportunity to cash out rather than lose time or stop accruing PTO when hitting deadlines.

Since PTO can be considered a liability on an accounting sheet, allowing payout for PTO can be advantageous to employers as well. However, employers must be cognizant of governing laws and regulations that may restrict their ability to allow employees to cash out PTO.

Options for PTO can be benchmarked based on industry, but at the end of the day, a PTO policy should add to the value of your company as an employer people want to work for. Also, it should conform to the needs of your business. Your TriNet representative can help to create a PTO policy that will fit your needs for today and your plans for tomorrow.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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