Is PTO Carryover Required?
As the end of the year approaches, it's important for employers to revisit their PTO policy and align expectations accordingly. With the COVID-19 pandemic still surging and holidays on the horizon, employees will start thinking about how much PTO they have left and if they should take it.
Why Does PTO Matter?
While most employers are not required to offer paid time off by the Fair Labor Standards Act (FLSA), many companies choose to do so in order to stay competitive and attractive to qualified candidates. Paid time off prevents burnout and promotes wellbeing for employees, and PTO policies can help set guidelines and expectations to help employees manage and plan their time off.
Are Employers Required to Carry PTO From Year to Year?
For most companies, no federally mandated PTO laws exist. However, there are exceptions. For government contract work and federally supported contract work that falls under the McNamara O'Hara Service Contract Act (SCA) or Davis-Bacon and Related Acts (DBRA), it may be mandatory to offer paid time off.
Since most employers are not required to offer PTO at all, they are also not required to let accrued or leftover PTO roll over onto the next year. However, companies may choose to let employees use their PTO without expiration until their annual hire date—rather than the start of the year—based on when they were hired.
What About PTO Payouts?
What if an employee leaves before using all of their PTO days? Are employers responsible for paying out this balance?
There are no federal laws that require employers to pay out PTO when an employee leaves. The only times an employer would be required to pay out PTO would be if the employer promised to do so in an employment contract or operated in a state that regulated PTO payout. Check to see if your state regulates PTO payout.
Likewise, employers may find that an alternative approach to PTO avoids these concerns. For example, an unlimited PTO benefit offers more flexibility for team members without HR and managers facing the ongoing hassle of managing time-off requests.
How Can Employers Optimize Their PTO Policy?
Companies can benefit from performing a regular audit on their PTO policy in order to accommodate a changing workforce. Whether your company has grown substantially and needs a complete PTO policy overhaul—or just a few minor updates—it's important to revisit your approach from time to time with a PTO audit.
Companies can use an HRIS to help manage those policies and track individual employees' PTO.
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