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Should Your PTO Policy Combine or Separate Sick Leave?

by Matilde Keith, PHR, SHRM-CP, on February 28, 2017
By now I’m sure you’ve already checked your calendars in anticipation of the next holiday or office closure.  While you’re looking, why not take advantage and address any paid time off policy issues and questions you have for the new year?

The beginning of this new year is a good time to familiarize yourself with new state and federal mandates regarding paid sick time.  More and more states are passing paid sick leave laws, and if you are a federal contractor, you must comply with these new rules.  How well is your company positioned should this become a mandate in your state or jurisdiction? 

Even if your company is not operating in a state where paid sick leave is required now, knowing what other states are doing can help you remain competitive.  And even if you are not a federal contractor, knowing federal government standards can be helpful in making informed decisions about implementing similar policies at your organization.    

When asked for my advice about developing a paid leave plan, it has long been my position to use a combined paid time off (PTO) policy versus a traditional leave program which uses separate vacation and sick time.  Apparently, I’m not alone.  In a Mercer Survey on Absence and Disability Management, 63% of organizations surveyed used PTO plans in 2015.  It was only 38% in 2010.         

PTO policies became popular for many reasons like better tracking, flexibility, and alleviation of privacy issues.  They allow employees more flexibility about how and when to use their time off.  If they do not get sick very much throughout the year, they can use more vacation time.  Or, if they need more sick time to take care of themselves or a loved one, they can use their available vacation time.  Employers hope this kind of added value will help attract and retain staff.   

Also, the employer does not have to make a determination about whether the leave applies as “sick” time or not.  This helps alleviate privacy issues and an employee may not need to disclose or justify the reason for their absence due to an illness. 

Although administratively, a combined PTO policy is generally more convenient than tracking separate sick and vacation time, now that sick leave has become mandated in some states and for federal contractors, I find myself reconsidering my position.

For one, most paid sick leave laws require some carryover of unused sick leave into a new accrual year.  If you have a combined PTO policy, this means you will have to allow all the leave to be carried over whereas if you separated the policy, you could choose to allow carryover for sick leave only. 

With most leave plans, an employee’s length of service and/or permanent, full-time status determines how much paid time off is earned.  However, paid sick leave laws frequently require an accrual of sick hours to be based on number of hours worked, regardless of full-time, permanent, part-time, or temporary status.  If you have a combined PTO policy, you may have to extend coverage to all employees in order to meet this requirement.  However, with a traditional separate vacation and sick leave policy, you can still limit vacation time coverage to only full-time, permanent employees. 

The same concept applies to waiting periods for accruing and using PTO.  Some employers chose a policy which allows the use of PTO only after six months to a year of service.  Yet, many paid sick leave laws require accrual to being immediately.  Although some do allow a waiting period for an employee to being taking the leave, employers will have to make sure their plans are consistent with the law.  With a combined PTO plan, these rules would apply to all employees for all hours.  But with a traditional separate plan, you can still control the accrual and use waiting periods for vacation hours.

As always, every company has different needs.  What plan you chose or what changes you make to an existing plan in order to comply with new laws will depend on those needs.  Your Human Resources Manager at LandrumHR can help you through this process. 

For more guidance on federal contractor paid sick leave mandates, please see the Department of Labor’s website FAQ page regarding Executive Order 13706.  To find out if you are required to comply with a state paid sick leave law, visit your state labor agency’s website.
Matilde Keith, PHR, SHRM-CP

As a Human Resources Manager for LandrumHR, Matilde Keith has over nine years of human resources experience in the Pensacola, FL area. Matilde specializes in salary surveys, compensation planning, job classification reviews, employee relations, employment law compliance, FMLA oversight, strategic planning, employee and supervisor training among other human resources duties. Prior to her current position, Keith worked as an HR Specialist for Landrum Staffing, managing the staffing needs of one of Landrum Staffing’s largest accounts. As a first generation Cuban-American, Matilde is fluent in both English and Spanish. Born and raised in Key West, FL, Matilde calls herself “an original Key West Conch."

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