Team Management

The Top 5 Small Business PTO Questions—Answered By Gusto’s HR Expert

Mohini Kundu Content Marketer, Gusto 
The Top 5 Small Business PTO Questions—Answered by Gusto’s HR Expert

Ah, summer. The season of camping, family vacations, and every small business owner’s absolute fave: PTO requests.

Simple time tracking that syncs with payroll.

Yeah, right. Between the emotional rollercoaster of granting vacay while staffing shifts and the logistics of tracking it all—PTO (paid time off) management can be a nightmare.

That’s why we asked the small business owners in our Facebook community, Talk Shop, for their top questions about managing their teams’ time off. Here’s what they told us:

Talk Shop top PTO questions poll

Once we identified the most burning questions, we put Gusto’s fearless HR leader Gina Hinman-Trulli to work, breaking them down one by one.

Your top 5 PTO questions, answered

1. How many PTO days do small businesses typically give?

Answer: 15 days

Gina says: A 2016 Society for Human Resource Management benchmarking report across all industries, tenure levels, and company sizes shows an average of 15 PTO days per year. It also shows that the average number of PTO days increases with tenure. Basically, the longer someone stays with you, the more PTO is typically given.

It’s also important to note that PTO is only one method for allotting time off. Some employers still separate sick time and vacation time (and sometimes floating holidays, volunteer time, personal time, etc.) into different buckets.  

2. What’s the best way to manage time-off requests around the holidays?

Answer: Based on your industry and business needs, decide on a clear, fair policy for how much time off can be requested—and when to request it—and make sure your team knows about it.

Gina says: I’ve found that it’s best to have a clear and upfront policy documented in your employee handbook on how to request time off; establish what type of advance notice is needed, and be clear with staff about time-off etiquette during busy times.  

For example, many small retail businesses are busy over the winter holiday season and may want to have a set number of time-off slots available during that time, or even prohibit vacation for a certain period. I generally find temporary bans on time-off requests result in more employees calling in sick or taking unplanned time off, so you should also have a policy about how you treat unplanned absences.

You might also want to have a documented method for granting the available slots (e.g. based on order received, or by tenure). But remember: If you have a process for granting time off when it’s limited or when you have multiple requests, or if you have policies around unplanned absences, it’s important that you’re consistent to avoid perceptions of unfairness or discrimination.  

3. What paid holidays do most small businesses offer?

Answer: Most small business offer the following paid holidays:

  • New Year’s Day
  • Memorial Day
  • Fourth of July
  • Labor Day
  • Thanksgiving Day and the Friday after
  • Christmas Day

Gina says: Most US companies, large and small, will offer some portion of federal holidays, most commonly New Year’s Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day. Depending on the industry, other days may be common (i.e. Columbus Day for banks).  

Again depending on industry, employers may offer additional non-federal holidays off as standard office policy, like Black Friday or the week of or after Christmas.  

For retail businesses, this may not be feasible—but for professional services industries, clients may not be available those days/weeks, making the closure easier. It can also be a smart way to attract talent if business will be slow that day anyway.

4. What are some reasons for considering broader PTO plans versus separate vacation and sick days?

Answer: Ultimately, all-encompassing PTO is easier for employers to track, and employees tend to prefer having a broader bank of allotted time off.

Gina says: A WorldatWork survey shows that PTO use grew to 43 percent from 2002 to 2016, while traditional programs (e.g. vacation time, sick time, personal days) declined by 19 percent during the same period.

PTO plans have a few advantages for employers, namely:

  • Less admin work than managing separate banks of time and accruals.
  • Fewer unplanned absences, because employees tend to plan their PTO more than sick leave, which is used at the last minute.

For employees, the draw of PTO is that you generally get a broader bank of time available for use, rather than having only a smaller, specific number of hours available for different needs (personal time, vacation, sick). So if your employees like longer vacations, PTO is a good match, but it may be a deterrent for employees who generally need more sick leave—like new parents, for example.

It’s also important to note that there are now emerging state and local requirements for making paid sick leave available, so it’s important to ensure that your PTO policies will meet local requirements on sick leave.

5. Should employees be able to cash out their unused vacation time?

Answer: In many states, unused PTO is the same as earned wages, so employers are required to pay out the accrued time.

Gina says: It’s important to note that if you create an accrual process for PTO or vacation time (i.e. employees earn X number of hours per month or week), in many states that is viewed as earned wages, and you are therefore required to pay out that time when an employee quits or leaves. This can result in wage liability, meaning you’re on the hook for your employee’s unpaid “wages” if you haven’t cashed out their unused time.

But there are a couple of ways you can minimize this dilemma. For example, consider an accrual cap (i.e. employees can’t accrue more than X number of days). This cap does a couple of things:

  • It limits the potential for ongoing liability.
  • It also encourages your staff to take time off!  

When it comes to allowing employees to cash out, my feeling is that if you have an accrual process in place, a cash-out offer can help eliminate some of the liability on the books (but you’d have to have the available funds to pay it, so you’d likely want to work with your accountant on the cost/benefit).  

However, it might be better to simply ask your employees to use the time they have accrued, and both of you will reap the benefits!  

Bonus: Are employers required to provide paid federal holidays or PTO?

Answer: There is no federal law requiring employers to provide federal holidays or PTO, but you may have to comply with local laws around offering paid sick leave.

Gina says: While there are no Department of Labor requirements for paid holidays or vacation time, there are several states and municipalities that are putting sick leave requirements in place. Stay tuned for more guidance on these local laws.

Updated: April 12, 2019

Mohini Kundu
Mohini Kundu Mohini Kundu is a news editor on the Gusto content team. She studied journalism at Northwestern University and started her career at The Huffington Post before embracing the #startuplife.

Comments

*Required fields

Your email address will not be published.

Back to top