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In the payroll business, we see many versions of time off policies – it’s rare to have two that are the same. However, one thing we do see with regularity is business owners tying themselves in knots trying to implement a policy that they think is fair for everyone. What they end up doing is creating a lot of work for themselves in the process. Here are some suggestions to keep in mind while creating or revising your time-off policy.

  1. Consider a tiered plan, based on hire date. This way, as your employees increase their tenure with you they accrue more time off. If you do this based upon their hire date, you won’t need to worry about pro-rating vacation time for someone hired part way through the year. For hourly or part-time employees, this can be combined with a per-hours worked accrual.
  2. Wrap vacation, sick and personal into one PTO plan. Research shows that companies that have banked sick hours actually encourages employees to come in when they’re sick,  increasing the sickness in the office through the spread of germs. A blanket PTO policy can be used for sick, vacation, doctor’s appointments, child recitals, DMV renewals… you get the picture. Employees enjoy autonomy. This is an easy way to give it to them, with minimal additional calculation on the part of the employer.
  3. Put all employees under one policy, or minimize the accrual schedule by job function. With the tiered plan from #1 above, the accrual is based upon their time working in your company. If executives receive more hours off per year or if their accrual is accelerated, create a separate plan for them. You can also separate a plan for hourly vs salary or full vs part time. The key will be to group them together as much as possible to be able to easily track employees who move between functions, work seasonally, or get promoted.
  4. Decide to roll-over unused hours and how many or decide not to roll them over at all. If you are going to institute a use-it-or-lose-it plan, this plan will zero out and reset at the beginning of their accrual year. If you decide to roll over hours, decide how many or if it should be unlimited. Whatever your decision it should be consistent.
  5. Keep it as simple as possible. A straightforward time-off policy is not only easier to manage, it’s very clear for your employees to understand. Time spent answering questions about who has 7.25 hours of vacation time and who has only 2 hours of sick time left prevents you from running your business and prevents employees from being able to focus on their tasks. A clear cut and consistent policy makes sure everyone is on the same page.
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