Implementing a paid time off (PTO) policy may seem like the answer to your scheduling questions. When you have employees taking advantage of unclear sick leave policies or when too many unscheduled absences are ruining your ability to plan, a PTO policy may be the answer.

In a BLR webinar titled "Paid Time Off: How to Draft and Administer an Effective PTO Policy that Complies with Both California and Federal Law," Marc L. Jacuzzi outlined some of the pros and cons to implementing a PTO policy in your organization.

What is a PTO Policy?

For employers who don’t currently use it, you may be wondering what a PTO policy is in the first place. Jacuzzi explained during the webinar that a PTO policy is one in which you are "combining all (or some) categories of paid leave into one bank, in particular, it’s combining paid sick leave and paid vacation. Typically, paid holidays are not included if operations close on those holidays."

Common Problems with Sick Leave Policies

Do you have problems with unscheduled one-day absences? Do you suspect employees are often taking sick days when they’re not actually ill? They probably are. "The reason is: employees understand well the effect of a contingent benefit vs. a non-contingent benefit." Jacuzzi explained. What does this mean?

A contingent benefit is one that the employee does not receive unless a qualifying event occurs. For example, bereavement leave is contingent upon the death of a specified close family member. Jury duty leave is contingent upon being called upon and selected to serve on a jury. Sick leave is contingent upon being ill or going to the doctor. But what happens to contingent benefits if the contingency never comes to pass? The benefit never accrues and is essentially lost to the employee – the employee gets nothing.

Employees are smart: they understand that if they don’t use their sick leave, it will go away and they feel that they have been cheated when their paid sick leave is lost. They want to maximize their fun time and they don’t want to use vacation time for personal business (court, car repairs, home repairs, other personal errands), so they "cheat" to take advantage of accrued sick leave.

Non-contingent benefits, on the other hand, are those benefits which accrue by virtue of continued employment without the requirement that any additional event occur, such as vacation days, personal days, or floating holidays. These cannot be forfeited and must be cashed out at termination.

Are PTO Policies More Fair?

PTO is legally the same as vacation. An employee may use the time for any reason she or he likes, subject to notice and scheduling requirements. This aspect takes away the contingency component for employees. It means that they no longer have to feel cheated out of leave time if they don’t get sick! As such, it prompts better scheduling since more time off is scheduled in advance. However, this also means that the full allotment of both vacation and sick days become an entitlement, which often results in a higher number of absences. Employers must weigh the pros and cons.

To register for a future webinar, visit http://catalog.blr.com/audio.

Marc L. Jacuzzi, Esq., is a shareholder in the law firm of Simpson, Garrity, Innes & Jacuzzi (www.sgilaw.com). He advises clients regarding all aspects of the employer/employee relationship including hiring and termination, wage and hour requirements, employee classification, civil rights and discrimination issues, employee investigations, commission plans, employment contracts, employee handbooks and policies, confidential information agreements, reductions in force, leaves of absence, employment audits, M&A employment issues, violence in the workplace, and international employment issues.