Creating a benefits package can be a complicated process. Firstly, you need to decide what it is specifically that you’re talking about when you’re talking about benefits. Are you referring specifically to things like a group health insurance plan, dental and vision plans? Or are you referring more broadly to include things like paid time off, employee assistance programs, or maybe even commuter or fertility benefits? And this is only the start of the process. Once you answer these questions, you’ll then need to initiate the process of actually offering these benefits. You’ll need to find a group health insurance plan that fits your business’s budget and has everything your employees need. You’ll need to decide how much PTO each person earns and how quickly they earn it. In some cases, you’ll need to track down the best HCM provider to find that all-in-one solution.
It’s a lot of questions, and questions are often accompanied by two things: answers and stress. At Payday HCM, we are very familiar with the stress that accompanies creating a comprehensive benefits package. We’ve had many potential clients approach us with these exact questions, unsure of what their options are or what the best path to take is. We want to be sure everyone has the answers they need—regardless of whether they are our clients or not. One question that we often see: should I separate my sick leave and vacation policies, or should I combine them into one comprehensive paid leave policy?
So, in this article, we’ll go over just that: the pros and cons of separating or combining your vacation and sick leave policies. We’ll get into the benefits and the drawbacks of both options, helping you to have a better idea of what might be best for your business. We’ll also cover some things to note when it comes to certain rules and regulations surrounding vacation and sick leave to ensure your policy is compliant as much as it is comprehensive. By the end of this article, you’ll have the information you need to craft your leave policy without the stress.
In this article, you will learn:
- What Are The Pros And Cons of a Combined PTO Policy?
- What Are The Pros And Cons of a Separated PTO Policy?
- Laws and Regulations Surrounding PTO and Sick Leave
What Are The Pros And Cons of a Combined PTO Policy?
Firstly, we’ll go over the pros and cons of creating a combined PTO leave policy.
Flexibility in Leave Usage
Perhaps the biggest advantage that draws businesses toward the option of a combined leave policy is flexibility. By combining different types of leave—vacation, family, sick—into one PTO policy, employees can benefit from added flexibility and the ability to take their time off how they would like to.
Ultimately, creating a sense of independence and trust within your organization comes with offering benefits that reflect this. By providing a combined leave policy, you demonstrate that you trust your employees to be able to take time off as they need. Flexibility is one of the most sought-after benefits: a survey by FlexJobs found that 63% of working people listed flexible scheduling as an important benefit to them.
Encourages or Discourages Taking Sick Leave
A combined PTO policy allows employees to use their leave as they see fit, which can encourage them to prioritize wellness without the fear of being questioned about their sick days. However, it may also lead to employees coming to work while sick, as they might prefer to save their PTO for vacations rather than use it for illness-related absences.
This type of presenteeism—when productivity is lowered by an employee coming in while sick or injured—can be risky for businesses. Organizations considering a combined policy should analyze their company culture as industries that reward overworking tend to see employees take less time off for fear of judgment.
What Are The Pros And Cons of a Separated PTO Policy?
Now, we’ll go over the benefits and drawbacks of offering a separated leave policy.
Higher Level of Customization
When it comes to separating the different types of leave into different categories, employers will have a greater amount of flexibility when it comes to crafting policies around these types of leave (within what’s legally allowed, but we’ll get into that a bit further down). This means an employer can opt to roll over sick days into the new year, but not vacation, encouraging employees to use their PTO to relax and recharge and not be afraid to miss work due to illness.
Along with setting different parameters in regards to what kinds of leave rollover or not, businesses can also set the different leave types to accrue at different rates. You could have your PTO operate on an earned model whereas sick leave functions more like a balance allotted each year.
Cost and Management for Employers
When it comes to operating a leave policy that separates out things like sick, vacation, or family leave, employers can expect to spend more time—and potentially more money—managing their leave policy. After all, it’s easier to manage one policy than it is to manage multiple policies.
Not only does the separation of policies increase the burden on the employer of having to track and enforce the different leave policies, it could potentially increase confusion for employees. There may be more questions about which type of leave an employee should use in different situations and a lack of employees taking certain types of leave for fear of running out.
Laws and Regulations Surrounding PTO and Sick Leave
Of course, creating a policy is one thing, but ensuring that the policy is compliant with all state and federal laws is another. We break some of them down here.
Federal Laws and Regulations
The legal landscape surrounding PTO and sick leave varies across the United States. While there is no federal mandate requiring private employers to provide paid sick leave, some federal laws impact employee leave policies.
Things like the Family and Medical Leave Act, which provides eligible employees up to 12 weeks of unpaid, job-protected leave for medical and family-related reasons, and the Fair Labor Standards Act should all be considered when creating your leave policy.
State Laws and Regulations
Now this is where things get a little dicey. While federal laws may not be so numbered in terms of employee leave and PTO, state laws can really vary. Some states have laws regarding paid sick leave (California, New York, Massachusetts, and Washington), while some mandate more comprehensive paid family and medical leave (Maine and Colorado).
One very crucial, and sometimes overlooked component, is payout and laws regarding PTO payout. Some states have laws requiring PTO to be paid out to employees upon separation. Payday’s home state of New Mexico has a law like this and can make combined PTO policies tricky: in New Mexico, if the time off is earned or accrued, it must be paid out. The Healthy Workplaces Act states sick leave does not have to be paid out, but if an employee’s leave all falls under one PTO umbrella, the line becomes unclear.
When it comes to ensuring compliance with state laws surrounding paid leave, it may be best to consult an employment lawyer at the time of crafting the policy. If you’re working with an HR service provider, they should ensure your policy is compliant.
Let Stress Take Some Time Off
Running a business is a stressful business. Creating a paid leave policy that is not only easy to manage and understand while simultaneously fitting each individual's own needs and attracts prospective employees to your company isn’t any different. When it comes to things like PTO and sick leave, you want to create a policy that works for everyone. This involves carefully weighing your options, taking time to discuss with others in your organization, and ultimately landing on the best-fit solution. With the information provided in this article, you’ll be one step closer to creating that time off policy you and everyone else within your organization have always dreamed of—when you’re done, maybe you can even take some time off for yourself.
As we’ve mentioned before, carefully creating your organization’s benefits package can not only help retain the people already in your business but also attract the ones who aren’t. Learn more about the benefits that people look for most and ensure you’re attracting and retaining top talent.