Helping Your Clients Set Up a PTO Policy

When it comes to payroll questions, you are your clients’ best resource. After all, business owners tend to want to focus on running their business, which is why they hired you as their trusted advisor. And when they seek input about paid time off (PTO), they may be asking what they should do and how to create a top-notch PTO policy for their employees.

How can you help your accounting and bookkeeping clients set up a PTO policy? Keep reading to find out.

What clients should know about PTO

PTO policies can help attract employees, but there are no federal laws requiring employers to offer any type of paid time off.

If you have clients in one of the following states, inform them that their PTO policies must comply with paid sick leave laws:

• Arizona
• California
• Colorado
• Connecticut
• Maine*
• Maryland
• Massachusetts
• Michigan
• Nevada*
• New Jersey
• New York
• Oregon
• Rhode Island
• Vermont
• Washington
• Washington D.C.

Some states (e.g., California) allow employers to have a PTO policy in place of a paid sick leave policy as long as the PTO policy follows the sick leave law guidelines.

*Maine and Nevada let employees take paid time off for any reason, not just sick leave. If you work with clients based in Maine or Nevada, notify those clients of the state laws regarding PTO. And if a client has employees based in either state, they should know the laws, too, even if their business is not physically located in either state.

Keep in mind that clients may offer paid sick leave or paid vacation time separately. But, combining all paid leave into one paid time off policy can let employees use the time off as they see fit. You can also simplify payroll with a consolidated PTO policy. Again, make sure the PTO policy conforms to state laws regarding paid sick leave to avoid penalties or fines.

Do you have clients who aren’t sure if they should offer PTO? Let them know the potential benefits to offering paid time off, including:

• Increased employee retention and engagement
• Boosted productivity
• Decreased absenteeism
• Increased recruitment opportunities

Setting up a PTO policy

Once you know the legal requirements for your client, it’s time to assist with setting up their PTO policy. The policy is crucial because it explains the rules for employees and the company’s guidelines. Your client may consider adding the PTO policy to their employee handbook, if they have one (note: you can help with that, too!).

Address these four sections in a paid time off policy:

• Number of PTO days
• Eligibility requirements
• Time-off request process
• Leftover PTO

Number of PTO days

How many PTO days does your client want to provide to their employees? This important question can have multiple answers. For example, a client may want to reward years of service from employees with increasing PTO days at set intervals. Or, they may choose to offer the same amount of PTO for all employees, regardless of longevity.

Clients who want to reward employees who stay with the company can increase PTO time based on length of service. For example, a potential PTO policy could look like:

• 1 - 3 years: 12 days
• 4 - 6 years: 14 days
• 6 - 10 years: 16 days
• 10+ years: 20 days

Work with your clients regarding how much PTO they want to offer and any rules they want to include for employees. Rules to consider include:

• Advance notice requirements
• Consecutive use limits (e.g., no more than 10 days at a time)
• Blackout times in which employees may not take PTO (e.g., the company’s busy season)

Eligibility requirements

The big question to ask your client is: Who can receive and use PTO? You can find the answer by asking your clients questions such as:

• Is there a waiting period before employees can accrue or receive PTO?
• If there is a waiting period, how long is it?
• Can both full and part-time employees earn PTO?

Again, Maine and Nevada have laws concerning PTO, so check with the state to determine the laws and regulations.

Your client may even choose to have different waiting periods for different employees, depending on their employment status. For example, your client may require a 90-day waiting period for full-time employees and six months for part-time employees.

Work with your clients to determine who is eligible for PTO and when.

Time-off request process

Once you know how much time your clients want to offer and who they want to give PTO to, guide them through determining how employees can use PTO.

Address the following with your client:

• How far in advance must employees request PTO?
• Does the length of PTO time determine the amount of advance notice?
• Should employees give verbal or written requests?
• Is the policy first come, first serve?
• What happens if too many employees request the same time off?

Let clients know that they can prioritize some types of PTO, such as vacation requests, on a first-come-first-serve basis.

Leftover PTO

The final piece of the PTO policy puzzle is to know what happens to unused time off at the end of the year.

The policy should answer if the employee can:

• Roll over unused PTO
• Cash out leftover PTO

In addition, the policy should list any restrictions or limitations. For example, a client can limit rolling over PTO time to 5 days (or 40 hours) with a maximum cash out of 5 days (or 40 hours).

Again, states may have laws that include how much time employees can roll over. Check with the state to determine if there are any use-it-or-lose-it policy restrictions or if your client’s state requires PTO payouts. In some cases, states may have laws concerning both. So, contact the state for more information, or check the state’s website.