Should I have combined PTO policy for my employees instead of separate vacation, personal and sick days?

December 5, 2019

Topics: Employment Policies and Practices

Most companies provide employees with some type of paid days off.  These policies usually fall into one of two categories:

  1. Policies that combine vacation, personal and sick days into one “Paid Time Off” bucket and
  2. Separate policies providing a separate number each of vacation, personal and/or sick days.

There are advantages and disadvantages to each type of policy.

Companies often think of each type of paid time off differently – but may not want the headache of tracking three different “buckets” of time.  Vacation time is considered available for blocks of time off to go away, spend time with family, or otherwise relax away from work.  Personal days are generally used for individual full-day absences for personal reasons, such as to chaperone a child’s field trip or for a religious holiday.  Paid sick time is for the individual employee’s short-term illness or injury preventing the individual from working, or for doctor’s visits, or medical tests, or to assist an ill family member or accompany them to doctor visits.  Sick time may be used in full-day absences but is also often permitted by the hour, where vacation and personal time off may not be.

If your company is located in a jurisdiction that requires the company to provide paid (or unpaid) sick days, it is generally prudent to carve out the sick days so as to be able to demonstrate that the company satisfies the requirements related to this time under the applicable law or ordinance.  There are often lengthy policies that need to be issued with multiple rules governing how sick time is to be used.  The company is likely going to want those rules to govern only the time allocated as sick time.

Similarly, if your company is located in a jurisdiction that requires the company to pay out accrued vacation days on termination, and prohibits what are called “use it or lose it” policies, the company is going to want to carve out vacation days from other types of leave so as to limit the potential number of days the company may need to pay out to a terminated employee.  Should a company have a combined PTO policy in one of these jurisdictions it likely will be required to pay out all earned but unused time.  Where separate policies are utilized, personal and sick days are generally not required to be paid out on termination in these locations.

When a company is located in an area that does not require the provision of paid sick days, and does not require the pay out of vacation days on termination of employment, the company has more leeway to structure a policy in a manner it prefers.  The company still needs to consider such factors as potential tracking methods and employee morale when designing paid time off benefits for employees.

The type of paid time off policy that would work best for your company depends, in part, on the various laws applicable to your location.  Consult with employment counsel to ensure that you are complying with all applicable law and structuring this benefit in a way that works best for your company.