Managing the day-to-day operations of your business can keep any owner busy. Top it off with the holiday seasons’ flurry of vacation time and sick days, and you’ve got an even bigger challenge. Payroll and paid time off for employees can get complicated. But The Payroll Department is always ready to help you simplify and make payroll details manageable.
When it comes to documenting employee time off, what’s your best course of action? Do you document sick days differently than personal vacations? Or should the time away from work be bundled in one lump total? Understanding the ins and outs of “paid time off,” or PTO, can help your company run smoothly year-round.
The PTO Time Bank
Nowadays, more and more businesses are combining their employees’ allotted personal vacation time and sick days into a single system. Sometimes called the PTO time bank, this setup does away with the distinctions about whether you’re using your day off to nurse a sick child or take a day-trip out of town. For some employers, why an employee isn’t at work doesn’t matter all that much. Whatever the reason might be, that time just gets taken out of their total paid days off.
A more traditional employee benefits setup might designate certain days for “sick leave” and others as “vacation.” Team members then might have a standard 10 paid holidays (like the Fourth of July or Thanksgiving), another 10 days for vacations, 2 days for personal time, and a handful of days for family or personal sick leave. When this gets translated into a PTO plan, the employee would just get a lump sum of 30 days off. In a lot of ways, this system can be easier for everyone—but only as long as the expectations are clear upfront.
PTO Pros and Cons
One of the most important things employers should understand about PTO is that they aren’t required to offer it. They aren’t even required to provide paid time off when employees are sick. It’s completely legal to not have one of these plans in place. Yet, many companies choose to do so because it can add some extra incentives to attract top talent and help keep team members happy. This can create some big benefits for everyone involved.
The downside of PTO is a little more complicated. For starters, some employees might be tempted to abuse the system. They might opt for a personal day during the company’s busy season, even when you really need all hands on deck. If this happens, it can be helpful to set some conditions on PTO. You might state that PTO requests need to be made two weeks ahead of time, whenever possible, or be prepared to sit down with a team member who seems to call off every Monday after a holiday if they’re needed at the office.
Another thing to keep in mind is that some employees may not want to use their PTO unless that absolutely must, or because they want to save it for an extra-long vacation. The result might be that employees who are ill still show up to work. You don’t want to risk other staff falling ill, so you might need to have a clause that lets you send employees home if they’re contagious. Some companies try to find ways for employees to still work, assuming they feel well enough. Roles that can complete tasks remotely at home can be a great compromise for everyone. They won’t have to spend PTO for a silly cold, and the rest of your team will be germ-free.
Tracking PTO for Payroll
Although PTO is designed to make the tracking simpler because you don’t have to document doctors’ notices or tally up what counts as a vacation day vs. a personal day, maintaining accurate records can still be complicated. That’s where The Payroll Department can help!
If you’re ready to outsource your payroll headaches, contact our offices. We’re proud to work with companies of all sizes in the Indianapolis area and beyond the state borders. If you have any questions about your bookkeeping or the latest in payroll protocols, don’t hesitate to call us at (317) 852-2568. Together, we’ll keep your business running smoothly with timely and accurate payroll.
-Elaine of The Payroll Department Blog Team