June 14, 2017

Classifying employee time off: Are separate vacation and sick days or inclusive paid time off better?

The debate about how to classify your company’s time off policy can be endless. Most companies find themselves deciding between a policy that separates vacation and sick days into two categories or an inclusive paid time off (PTO) bank affording employees their own flexibility.

Tailoring your company’s approach to employee time away from the office requires thoughtful consideration and strategy. As you review, update or change your firm’s policy, consider the below advantages of vacation/sick versus PTO.

 Vacation/sick policies:

  • Due to recent changes in state laws, separating the days can provide more freedom for employers related to how much time they offer to employees, what is payable upon termination and if carry over is required.
  • Because they are using sick time, employees are encouraged to stay home and not spread illness to others. PTO is often viewed as vacation, so employees are more likely to report to work when they are sick.
  • When using sick time to care for a family member, employees are less likely to feel negative since they don’t have to use time considered as vacation.
  • A separate strategy allows for flexibility in offering sick time carry-over days without a significant financial burden to the employer.
  • The company’s financial liability on unused time is reduced because employees will use what they have as PTO, but may forfeit remaining sick time at the end of the year.
  • Employees are encouraged to not use sick days until needed, unlike PTO where employees may use all as vacation and then become ill at the end of the year with no time to cover it.

 PTO policies:

  • An inclusive PTO policy is often more positively perceived by employees as providing flexibility. Employees own the control of their absences.
  • Since this type of policy is generally more preferred by employees, it can be used as a recruiting and retention tool.
  • Employees will schedule time off in advance for personal matters, reducing the likelihood of call-ins that aren’t medical related.
  • Healthy workers do not feel penalized or the need to lie because they can use their time off how they choose.  
  • An inclusive PTO policy refocuses an absentee discussion to performance-based discussions. While advance requests are desired, they are not required, and therefore, less time is focused on whether an employee was sick for their absence, but instead disciplinary action is focused on actual performance of the employee.
  • There is less administrative burden for employers, as there is only one accrual bank to maintain. An absence is an absence regardless of the reason.

Ultimately, you must make the right decision for your business, employees and culture. Before making any change to your current policy, consider employee perception and the effects on morale. If you decide to move forward with a switch, ensure the reasoning and benefits are effectively communicated to employees. Be open to feedback, and if necessary, consider how you can better tailor the policy to meet the needs of your company and employees.  

The most important thing to remember when building a policy is to never let one instance become the defining reason for a decision. In other words, don’t let one time of employee misuse be the singular reason for a decision or change. Address abuse as a performance issue and build a plan that holistically considers all aspects of your business. Remember, it’s a benefit, so keep it beneficial!


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