Small Business Big World
New episodes every Tuesday discussing the challenges, adventures and fun of being a small business owner. Each week we'll delve into various small business topics, from real-world DEI considerations to selling your business, using video to market your business, unique benefit offerings for your employees and so much more. Curated by the crew at Paper Trails.
Small Business Big World
Crafting Effective PTO Policies
Learn how to craft effective Paid Time Off (PTO) policies with HR consultant Dawn Powell as our guide. Why settle for a generic approach when you can tailor your PTO policy to fit your industry's unique needs? Join us as we talk through the best practices, such as simplifying PTO into a single category to avoid micromanaging vacation and sick leave. We also explore the particular challenges of adapting PTO policies across states with varying regulations, including Maine's specific legal requirements for earned paid leave. Dawn shares invaluable insights on the importance of a well-documented policy in an employee handbook, ensuring clarity and fairness for all.
This is Small Business Big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to Small Business Big World, our weekly podcast, where we talk about all things small business the fun, the excitement. And today we're going to talk about the paperwork, which is very exciting.
Speaker 1:Dawn Powell is my guest today, our HR consultant here at Paper Trails. Welcome Dawn. Hi, Chris, Welcome back, right? Yes, Thank you for joining us. So today we are going to talk about PTO policies, paid time, off, leave, all of that fun stuff, which is probably the number one question that we get asked here at Paper Trails is about all of that exciting stuff. But before we get into that, don't forget, please like, follow, share, rate, review. Wherever you get your podcasts, a review and a rating would be really helpful. And certainly don't forget to subscribe so you can get us right in your inbox every week. We are available on all the podcast platforms, all the social platforms and if you ever have questions for us or any of our guests. You can certainly reach out to us at podcast at papertrailscom, and we will get answers to your questions. So, Dawn PTO.
Speaker 2:Yes, hot topic Hot topic.
Speaker 1:So this is again. This is probably the number one question that we get asked here in the office by our clients is you know, what do I need to do for PTO? Why do I have to have PTO? How do I do PTO? What do I? You know all those kind of things? How do I keep track of it? You know we always tell people you know, start with a great foundation, make sure of a good policy right.
Speaker 2:Yeah, policy is really important. You know it may seem like it's a pretty easy, straightforward thing, but if you don't have a policy, when someone wants to either use their PTO or is ending their employment and you're trying to decide if it needs to be paid out or not, a good policy is really helpful in that case.
Speaker 1:And we certainly see that you know, as you're developing policies with our clients, that you know they don't necessarily know what they want to do or how they want to do it, and certainly in some environments, you know, operationally PTO is easier than others. You know we're in an office. It's a little easier for us to manage PTO than, say, in a restaurant, right? So everybody's policy is going to be a little bit different, which is really important in when you're writing that policy determining eligibility, figuring out how you're going to accrue, who's going to get timer off If it's going to roll over, it's going to pay out, all that kind of stuff.
Speaker 2:Right. So one of the things that I see a lot is people thinking that a policy is one-size-fits-all and so they'll go and just Google a PTO policy and think that, okay, well, this will fit. And really it doesn't for specific industries for the reasons that you just mentioned, right?
Speaker 1:One of the questions we get asked a lot. Or we see people try to really micromanage their PTO, I would say, and sometimes that's in the forms of having different buckets, right, they may have vacation or sick or personal or PTO, or they call them all sorts of different things. Right? What do you advise clients when you're? You know people are going through that.
Speaker 2:I mean, at the end of the day it's all time off. So for me, best practices put it all into one bucket and that way you're managing one bucket, you have one bucket of approvals and you're not trying to micromanage. Well, are they taking sick time or vacation time or personal time? It's all just time off and it makes it a lot easier.
Speaker 1:And in Maine, for example, we have requirements that you have to offer certain time off right.
Speaker 2:Right. So in Maine we have the Maine Earned Paid Leave and, in a nutshell, what that is is you have to provide one hour of paid time off for every 40 hours worked, to a maximum of 40 hours each year.
Speaker 1:Right, and there's nothing that says you can't go above and beyond that right, you can offer as much as you want, but certainly you know that is the minimum required that you have to give time off. And you know we talked about those different buckets In Maine, we don't. It can be used for anything. Right, that earned paid leave can be used for sick, personal bereavement, anything you want to do it can be used for that right.
Speaker 2:Right. Correct Yep. You have to allow employees to use that time for any purpose. Right.
Speaker 1:And you know the state has said it has to be a reasonable request and timing and they can't just come to you today and say I'm taking today off, you know, and expect to be paid for it, right.
Speaker 2:Right. No, there are some guidelines around requesting the time off and around granting the time off. Certain industries are allowed to have blackout periods where you, unless it's in case of an emergency, you can not allow employees to take time off during your peak seasons and things like that.
Speaker 1:Right, which is the importance of having a good policy.
Speaker 2:Correct All of that needs to be documented in a policy and outlined in your employee handbook. Right.
Speaker 1:Which employee handbooks are a whole different conversation.
Speaker 2:That's another podcast. We'll do another one. There we go, see, I'll get you back.
Speaker 1:You know. So when you're looking at PTO, that policy, what should be in that policy? I guess?
Speaker 2:Really all the guidelines about how that policy is going to be accrued when it starts. So, for example, you know if your employees don't start accruing right away or if you don't allow them to use the time off right away. That needs to be in your policy. A lot of companies don't allow employees to use their time off until they've met a 90-day probationary period or something like that. That needs to be documented. Blackout periods if you're going to have those, those need to be documented. Increments of time that you're allowed to request Are you going to allow employees to use a half an hour an hour, a half a day? You know all of those things need to be outlined. And then you know you need to document. You know, at the end of employment are you going to pay that out or is it? You know, do they lose it if they haven't used it when they terminate employment? Do you allow rollover? How much rollover do you allow?
Speaker 1:All of those things need to be documented in your policy and a process for requesting and approving time off right, correct, you know that's important too is, you know we always tell our clients, you know, push that work down on your managers right, make them managing the calendar and schedules and so forth. But that's important who do you request time off from? What's that process look like?
Speaker 2:Right. So you know I solved, which is the software that we use has a great mechanism for requesting. There's a calendar that shows your team and what that looks like. You know who's out, who's in that kind of thing, and you know. Those things all come into play when you're approving time off. You don't want to approve time off for all of your employees, leaving you to drive the ship by yourself.
Speaker 1:Right and we use that tool internally and even things like you can have a maximum number of people that can have that day off. Within the system we set those rules, which is really helpful. I note to Michelle when she's reviewing and approving time off is the system we set those rules, which is really helpful. I know to Michelle when she's reviewing and approving time off is okay, who's got time off right already? Who's already been approved? You know, and in certain certain situations we've had to say no, sorry, I can't give you that day off for whatever reason, and that's okay too.
Speaker 2:Right, right, right. And another thing that you probably want to have in your policy is how you consider those approvals. Is it a first in, first approved, or you know, is it done on seniority, or you know how is all of that done and how do you decide who is allowed to have the time off and who might have to? You know, push it down the road a little bit.
Speaker 1:What about payouts? Are you seeing clients paying time off out?
Speaker 2:So it's really important what you call your time off, whether you call it PTO, vacation, personal time. In the state of Maine, you are required to pay out any accrued vacation when an employee terminates. Now, if you call it PTO, that's not always the case according to your.
Speaker 1:And that's just a total loophole, right? Yeah, it's funny. When the state passed this law, they knew they were going in contradiction to their own earned paid leave law that says you don't have to pay out the earned paid leave, but now they've passed a policy that says if you had vacation, you have to pay it out upon termination. So it's kind of crazy, and it's been that way for a couple of years. I'm surprised they haven't fixed it yet.
Speaker 2:Yeah, I kind of expected them to go in and clarify that, but as of yet, if it's a vacation, you have to pay it out. If it's PTO, it's according to your policy.
Speaker 1:Right, it's crazy, but you know that's government at work and that's something new that we're seeing across the country really is this wave of legislation that really is subjecting employers to provide time off, whether it's some states just say you have to have sick time, some states say it's the total earned leave, like what we have here in Maine. So it's you know, and you know now we're seeing the paid family medical leave and all sorts of leave. You know and that's a whole different podcast too but you know we're seeing more and more and more, you know, of those types of laws going into place, which is certainly impacting employers.
Speaker 2:Right, and it does vary state by state, which you know makes it really important. If you are operating in multiple states, your policy needs to address the rules and the legislation for each of the states and how that applies to the employees in those states each of the states and how that applies to the employees in those states.
Speaker 1:One of the new things it's. You know and some people call this a scam, but one of the new things that's out there is unlimited PTO right. We do that here. What are you seeing? You know how are you working with that, with clients, and what are your? What considerations are people taking into account when they do?
Speaker 2:that On the surface, unlimited PTO sounds fantastic, but it has to be managed and you do that. You know through the blackout periods and you know looking at the time off calendars and you know making sure that you don't have your whole staff out on one day. But it really does give a lot of flexibility to employees and it's a really good benefit and a good perk. A lot of companies haven't started adopting that yet.
Speaker 1:It was big in like the tech companies. I think Google was the first to do it right, Right you know I'll say you know we do unlimited PTO here.
Speaker 1:And you know one of the things about that I tell people I hire professional, competent, responsible adults who I trust can get their work done and manage their lives at the same time. And you know, it doesn't mean you get to go to Bora Bora for eight weeks and expect me to pay you, but it does mean that I think you're responsible enough to take what time you need and I'll continue to compensate you as long as your work's getting done. And if we have performance issues, then we have to deal with those and we deal with that in a professional manner, rather than someone says, oh gosh, you hit your five PTO days for the year, we're done, you can't do any more. Again, if you think you could take seven and still get things taken care of and make sure the clients are happy and all that stuff, we're fine with that too, and that's, you know, been our policy. And certainly that doesn't work in every industry or every business.
Speaker 2:No, I think a lot of like the seasonal industries and things like that. You know that probably would not be the best way for them to handle it, but for a year round business, you know I it's been great for me to have that flexibility and, you know, not have to worry about sick days versus vacation days and you know, just if I need some time off and I have my work caught up, you know I'm able to do that and that's a really good perk for employees.
Speaker 1:I would. You know, in building, whatever policy you're going to come up with, I always tell clients keep it simple, right, don't overcomplicate it for you or for your employees, because you've seen nightmares, I'm sure, of policies that are to the nth degree of calculation and all that stuff, right?
Speaker 2:Yes, that's why it's really important to put those parameters and guidelines around your policies. What you don't want is to have, you know, 10 different buckets of time off and trying to figure out you know what is this particular day off fall under and you know. Then you run into the cases where people have 10 sick days but they've used all of their personal time and you know, do you allow them to use a sick day? And if you do it for one, then you have to do it for all, whereas if you just have that one bucket of PTO, it really simplifies.
Speaker 1:Yeah, You're saying, listen, this is what you know, this is what you have for time, and you manage it right. That puts the onus on the employee more than anything.
Speaker 2:Right.
Speaker 1:You know, I think one of the arguments that I hear from people is oh well, they're going to use all their PTO and then they're going to get sick and then not get paid. Well, I think that again puts the onus on the employee to manage their time Right. I mean, most of the time when people are giving PTO, they are giving adequate PTO to cover a potential illness or time off, things like that, right.
Speaker 2:Right. I mean, and you know you're always going to have, you know, extenuating circumstances, and that's where things like you know FMLA or paid family leave or those kind of things come in. You know if you have an extended illness or you know something like that. But you know, under normal circumstances most companies' policies will include enough days for employees to be able to do what they need to do.
Speaker 1:You know, one of the things that we've seen a lot of our clients start doing is really putting short and long-term disability policies in place which are relatively affordable and takes the onus off of the employer. It's a little bit of a safety net for the employer because I know I would feel guilty if you know God forbid you get in a car accident, something terrible happened. I would feel responsible in that. I would feel guilty if you know God forbid you get in a car accident, something terrible happened, I would feel responsible and then I would need to pay you for as long as you know you needed to be out and that's not great for me or for the business. And so you know we've seen a lot of clients put that short term disability policy. So after 10 days the insurance picks it up, right. It's that safety net.
Speaker 2:Right, right, and you know that if you have a really good employee who you know has something like that, come up, you know it allows them to take off the time that they need and, you know, get healthy and get back to a place where you know they can come back to work and give 100% and they still have a little bit of income replacement, so that you know they don't feel like they have to go and you know work a part-time job somewhere or something like that.
Speaker 1:Right, go, and you know work a part-time job somewhere or something like that. Right, and you know we're going to see most, many, many states are now taking over that role through their paid family leave programs. You know we're coming into that main. Certainly there are many other states that have done that. New Hampshire's got a voluntary one, massachusetts got one, you know so, and many, many states across the country are doing that. So the states are taking that role of, you know, after a certain number of days of illness or absence, for whatever the case. You know certain scenarios in certain states, but you know that is taking the risk off of the employer as well to carry the PTO forever, right?
Speaker 2:Right, yeah, no, it's definitely putting some limits around that, and I think you're going to see a couple of things. And I think you're going to see a couple of things. I think there's going to be some private short-term disability insurance that's going to come into play as these states start requiring this, and I think for some companies, the short-term disability will go away and they'll start offering a long-term disability policy that'll pick up after the state plans. Yeah, lots and lots of changes in that marketplace, which is a whole different conversation.
Speaker 1:But you know, I think just having that security as an employer is good, especially again for us. We have unlimited PTO, so it really makes it so that, if you know, from maternity leave or something like that, it takes the onus off of me and the financial burden and the operational burden off of me to manage it. So that's always something to think about when you're creating a policy as well. Just all the other levers and switches you can pull. So what mistakes are you seeing businesses make with PTO?
Speaker 2:One of the biggest things that I see is around carryover and businesses that are allowing employees to carry over, carry over, carry over and pretty soon they have 300 days of PTO. Number one that's a liability on your balance sheet and that carries over year to year. And number two there is no possible way that an employee could take all of that time and, you know, still get their work done, and so when that employee terminates that's a huge liability at the end.
Speaker 1:Yeah, the payout's huge and that you know I would. I think we see fewer and fewer people doing that, but I would definitely say some of the older businesses have done that and we see big, big balances.
Speaker 2:Yes.
Speaker 1:And someone says oh, guess what, I'm gonna retire and I get to get paid for the next six months into retirement or whatever.
Speaker 2:Right, that's why it's really good to look at your carryover policies. And you know, yeah, absolutely. I mean there are years when you know, if you say you offer three weeks of PTO and somebody only takes two, and you allow them to carry a week, you know a week is one thing, but when it gets up to you know hundreds of days, that's a whole nother situation.
Speaker 1:Yeah, I think the other thing that we see a lot of is people making exceptions to their policies, right, yes, yes.
Speaker 2:Always a bad idea because what you do for one employee you need to do for all employees you know. Say you allow someone to you know carry over an extra week for some reason and you don't do it for another employee. Disgruntled employees can cost you a lot of money in various ways. Sure, we, you know I think.
Speaker 1:it does not mean, though, that when you hire someone and they negotiate an extra week of pay, that is okay, correct.
Speaker 2:Right, yeah, absolutely. Um. You know, going into a um employment relationship, it is pretty standard for people to negotiate um time off and you know really important to include that in the offer letter when you um extend the offer to the employee. But that happens daily.
Speaker 1:And as long as it's documented, and so forth. And that's oh. Hr is document, document, document.
Speaker 2:Document everything. If it's not documented, it didn't happen, right.
Speaker 1:So that's really important too. But you know, certainly I think every business is different Everybody's. Every business's needs are different, of course, operationally. So but going back to the again. The basics start with a good policy. Figure out what you want to be when you grow up and how you want to manage your PTO and really get that policy straightened out. So we're good. We hit a lot of PTO talk today. Any other closing thoughts about PTO before we?
Speaker 2:end. If you have questions, just remember to reach out to us. I have a questionnaire that I go through with clients to design their PTO policies because, like I said before, it is definitely not a one-size-fits-all thing.
Speaker 1:Absolutely. We deal with that every single day getting those kind of squared away for clients. Well good, well, dawn, thank you so much for joining me again, and we'll have you back for more talk about some of those other things, handbooks, right, we got to get.
Speaker 1:that's what we got to do so. But good for. And again, remember, please like, follow, share rate, review, subscribe anywhere you get your podcasts. Please hang out with us so we can keep doing this and having fun doing this and having fun. And again, if you have any questions for us or any of our guests, you can email us at podcast at papertrailscom. That's Small Business Big World for this week. We'll see you next week. Thanks for listening to this week's episode of Small Business, big World.
Speaker 1:This podcast is a production of Paper Trails. We are a payroll and HR company based in Kennebunk, maine, and we serve small and mid-sized businesses across New England and the country. If you found this podcast helpful, don't forget to follow us at at Paper Trails Payroll across all social media platforms and check us out at papertrailscom for more information. As a reminder, the views, opinions and thoughts expressed by the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, paper Trails does not imply endorsement of or opposition to any specific individual, organization, product or service.
