PTO policies require regular review for companies to remain competitive, compliant, and financially solvent. Whether completely reworking your organization’s time off benefits or simply tweaking here and there, find out what HR needs to know about auditing and updating a company’s PTO policy.
A PTO audit is an essential part of ongoing HR compliance. In some cases, conducting a time off policy audit may require a few small adjustments to accommodate an organization’s workforce. In others, such as the 2020 COVID-19 pandemic, a PTO review could save your organization from financial ruin.
For example, if each of your employees decided to save their accrued time off and use it all at once during December, your company could lose an entire month of productivity. Likewise, what if your company has committed to paying out unused vacation days and the same situation occurs? And what if you’ve had to lay off teammates—does your company promise PTO payout?
An audit can help prevent these potential risks. By considering your company’s financial health and the benefits package that it offers, plus any federal or state PTO laws that may apply, HR can lead the charge towards meaningful PTO change—and a healthier organization.
Many small and mid-sized employers experience staffing strain at the end of the year as employees take off work at the same time. However, PTO issues can crop up at any point.
For many organizations, the two most common PTO approaches include:
Recently, unlimited PTO packages have grown in popularity among employers as a tool to retain and attract employees. While this approach may seem especially generous, these policies can increase work trust and performance, avoid an end-of-year rush, and save your organization time, energy, and money in the long run.
Regardless of your current approach to paid time off, there’s a very good chance that your organization hasn’t audited its PTO policy in a long time. It’s time to change that. When reevaluating your existing policy, consider the following questions:
Does vacation time apply to salaried employees only, or also to hourly teammates? What about part-time employees? This should be specified if not already.
Do employees earn their PTO over time, are they given a set amount each year, or is PTO unlimited? If allotted or accrued, your policy must specify exactly how employees earn this PTO and when it’s awarded.
Do you use a digital platform to track PTO? If so, include how the updates will impact how this system is used.
Does your organization offer extra PTO to more-tenured employees? This could include step increases (i.e. after five years, an additional 40 hours of PTO is awarded each year) or remain standard regardless of seniority.
If you know that a specific season or month of the year is particularly busy for your team, consider implementing an exception that PTO requests during this time period may not be approved.
In some cases, employees’ PTO may be tied directly to their hire date. In others, PTO may reset each year for every employee, no matter their start date. Make sure to specify how this works in your new policy.
If not, employees could theoretically build up a bank of time off for literal years, otherwise known as PTO carryover. Unless you’re interested in teammates embarking on back-to-back sabbaticals, consider implementing a “use-it-or-lose-it” cap or a rollover limit from year to year.
Similarly, revisit your policy’s approach to payout on unused PTO—including workers who are laid off or who voluntarily leave the company. It’s okay if you do payout PTO, but consider capping it at a certain threshold to avoid mass distributions at the end of the year.
Any honest assessment of your organization’s employee benefits must include a comparison to other employers, particularly those that directly compete with you for talent. If your benefits can’t hold a candle to your competitors’ offerings, how will you ever be able to hire the best of the best?
Employees may not like the changes that you make, depending on the type of policy that your organization had in place before your audit and update. That’s okay. It’s HR’s job to clearly communicate changes and address any questions that employees may have.
Include the following information in your communication:
To learn more about communicating these updates, use the template in this BerniePortal resource.
You can stay informed, educated, and up-to-date with important HR topics using BerniePortal’s comprehensive resources: