By Paul Edwards bio
What does your practice do about unused PTO from last year? Doctors and office managers often ask us questions like this:
“My employees want to know if I will roll over or pay out unused PTO from last year. Am I legally obligated to do this?”
This question is more complex than it sounds! First, this issue depends heavily on state laws, as federal law does not require paid time off. Most states do not specifically require employers to provide paid or unpaid vacation time, either, but almost all states treat vacation like a wage: once promised and earned, it cannot be taken away or forfeited. So to have a “use it or lose it” or forfeiture policy, you must be careful that it is legal in your state.
(On a related topic, note that an increasing number of states and cities now require employers to provide paid sick time, and may impose rollover requirements for that time.)
Your options also depend on whether your policies are detailed and written clearly enough to only promise what you intend. Look closely at your existing PTO policy and seek experienced HR advice, if needed. Otherwise, in a dispute or after a termination, anything left vague or unaddressed will go the employee’s way.
If you note irregularities in your policy, it’s best to err on the side of paying for unused time, or roll it over so that earned time is not forfeited. Then, get expert help updating your employee handbook so your policy fits what you want, within legal bounds.
Depending on your state, consider these points:
- Does your policy explicitly state how time is earned/accrued?
- Who is eligible for PTO (full-time, part-time, and/or temporary employees)? What about doctors?
- How long after being hired does PTO accrue? Will you use the calendar or the employee’s anniversary?
- How much PTO will accrue and how often? Can it be advanced?
- Are employees required to use available PTO/vacation before taking unpaid time off?
- Is rollover allowed? Is there a cap, or a point at which employees cannot earn more PTO until depleting their bank?
- Would it work better for your practice to pay out unused PTO at the end of the year and start fresh?
- Is PTO only available for use during certain times, like a practice closure? (If so, the doctor should make vacation plans known at the beginning of the year so everyone can plan.)
- What happens at separation (most states require unused accrued vacation to be paid out)?
Make sure you understand the differences in how PTO works for exempt employees.
Finally, let’s touch upon morale. For an employee who did not use their PTO, it can feel unfair to be penalized for not taking it. So that’s another issue to consider: You may want to either allow some rollover OR pay out unused PTO each year. If you use the calendar year for accrual, cashing out unused PTO can also help avoid the holiday drain of everyone wanting to take time off together.
Of course, no advisor or guidance can answer all circumstances surrounding a particular PTO issue without speaking with you. And like any HR issue, it’s best to have your policy regularly evaluated and updated by an expert.
Paul Edwards is the CEO of CEDR Solutions (www.cedrsolutions.com), the nation’s leading provider of customized medical employee handbooks and expert HR support for practices of all sizes and specialties. He can be reached at 866-414-6056 or pauledwards@cedrsolutions.com.
