How To Develop, Track & Administer A Paid Time-Off Program

July 27, 2022
Photo by Aron Visuals on Unsplash

Providing vacation to employees is part and parcel of running a business, but it can be hard for startups to get a paid time-off program up and running.

It’s not just about offering holiday opportunities to attract top talent, but also about getting to grips with the administration side of such a scheme.

If you’re intimidated by the prospect of overseeing this, let’s take you through what you need to do so it’s less daunting and more manageable.

Get to grips with rules & regulations

Each state has its own laws covering employment, and there’s also federal legislation which dictates how much time off workers can take per year without putting their jobs at risk.

There’s no top-level legal requirement for paid leave to be provided, but businesses tend to offer this to incentivise new hires to accept job offers.

You also need to consider the different rules that apply to full time employees and contractors, as well as to team members based elsewhere in the country or the world. If your startup will be hiring remote workers, for example, you have to find out what obligations you face regarding time-off, if any.

Weigh up categories of leave

Some businesses choose to bundle the three main types of leave together under a single plan, while others deal with vacation, sick and personal leave individually, allocating different numbers of days to each in a given year.

When developing a paid time-off (PTO) program, this is a major fork in the road. A combined package gives employees more flexibility, but might result in compromises in the case of unexpectedly protracted illnesses, for example. A split package is a bit more rigid, but gives employees peace of mind that their personal days aren’t eating into their sick leave allowance.

Again, there’s no federal law requiring paid sick leave to be offered, but states including California, Connecticut, Oregon and New York all have laws requiring businesses to offer mandatory minimums in this context.

Another factor to consider here is the extra administrative burden that comes with compartmentalizing categories of leave. If you do this, tracking holidays using a time off manager is advisable. It will save you a lot of paperwork and stress, while ensuring leave is distributed fairly and that the program is not exploited.

Explore eligibility options

The next decision to deal with is that of who’s eligible for your PTO program, and what levels are available within it.

The most common example of this is encouraging loyalty by giving more paid vacation days to team members once they pass a particular service milestone.

You might also consider having PTO accrue over the course of a year, rather than being frontloaded so that it’s available right from the get-go of the calendar. The reason for this is simple; if an employee quits with paid time-off still to take, you may be obliged by state law to pay them for this on top of any other severance package.

Then there’s the potential to divide PTO eligibility depending on the status of the employee. Permanent team members might get more time off than part timers, freelancers or contractors. The same could apply to in-house workers compared with remote workers.

Once more it’s necessary to restate that every decision you take has to be in line with the laws of the land. Getting an employment law specialist to assist you is sensible.

Select usage requirements

Developing a PTO program involves building policies that when leave may be requested, and the period within which allocated time-off has to be used.

Basically, you need to tell employees what they need to do to request leave, such as requiring them to apply for a vacation or personal day a minimum of a month ahead of schedule. You also have to set deadlines on PTO usage, or allow for unused days to be rolled over to the next period.

Document PTO policies

All of the decisions you make and the policies you create have to be thoroughly documented and made available to employees.

It’s a good idea to include discussion of these policies when onboarding new hires, so that there’s no confusion early on.

Get tracking

Earlier we mentioned that there are fully fledged time-off management solutions out there, and embracing such a platform is advantageous, especially for startups that don’t have much administrative wiggle room.

The top solutions in this market can wrangle the ins and outs of any PTO program, make sure that employees are treated fairly, along with your business. So this final stage is perhaps the most important, and afterwards you’ll be ready for roll-out.

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