If your employees are on vacation or FMLA leave, do they continue to accrue paid time off (PTO)?
Generally, the answer is pretty simple. It’s your decision whether or not an employee continues to earn PTO while on Family and Medical Leave Act (FMLA) leave or vacation.
Accrued time off is PTO an employee has earned but hasn’t redeemed yet, while PTO accrual is how an employee can earn that PTO. And for small business owners, the rules around it all can seem a little confusing.
The rules may differ depending on the type of leave your employees take, your company’s PTO policy, and sometimes, your state laws, if they exist.
Can my employees accrue PTO while on vacation?
This choice is yours.
Your vacation accrual policy can allow employees to continue earning vacation while they’re on vacation, or you can say that accrual pauses while they’re out on PTO.
Whatever you decide, make sure your PTO accrual policy applies to all of your employees, and that it’s included in your employee handbook. Otherwise, it may be seen as discriminatory.
Here are a few sample PTO accrual rules you can incorporate into your broader PTO policy:
For example, let’s say Simone accrues 0.25 vacation days for every 40 hours (a typical work week). She works for three weeks, then takes a one-week vacation. If the vacation is paid—and your policies state that paid vacations accrue PTO—she’ll earn another full day of PTO during this four-week period.
Here’s how to calculate Simone’s accrued time off:
How the New Propositions Passed in Colorado May Affect Your BusinessFinances and Taxes
0.25 x 4 (3 weeks of work + 1 week of vacation) = 1 vacation day
If the vacation is unpaid (or you don’t allow PTO to accrue while employees are on paid leave), she’ll accrue 0.75 vacation days.
0.25 x 3 weeks of work = 0.75 vacation days
This is because Simone only accrued PTO during the three weeks she worked and not the week she was on vacation.
Can my employees accrue PTO while on FMLA leave?
Generally, state and federal laws treat PTO accrual the same for both personal and vacation time and protected FMLA leave.
As long as you consistently follow your company’s PTO policy, you can either allow or not allow PTO accrual to continue while an employee is out on FMLA leave.
The law requires you to treat employees out on FMLA leave the same way you treat other employees who aren’t out on leave. So if your policy says employees accrue PTO while on paid leave and the FMLA leave is paid, those taking FMLA leave must accrue PTO while they’re out.
Below are two examples of how a PTO accrual policy can interact with FMLA leave:
- Your company doesn’t allow employees to accrue PTO on unpaid leave, but they do accrue while on paid leave. Annette takes her full 12 weeks of FMLA leave, but per company policy, she uses PTO for the first three weeks of her leave. She would continue to accrue PTO during the first three weeks but not accrue any PTO during the last nine weeks of unpaid leave.
- Your company only allows PTO to accrue while your employee is actually working. Andre takes four hours of unpaid FMLA leave each week for doctor’s appointments. He would accrue prorated PTO for the time he spends working.
Why would an employee be able to use PTO toward FMLA leave?
The law defines FMLA leave as job-protected unpaid leave. However, employers can pay employees who are out on FMLA leave if they so choose. Employees are also able to take FMLA leave and paid vacation time at the same time.
In fact, you can usually require employees to exhaust their PTO bank while on FMLA leave. However, if your employee is also receiving a paid benefit, like health insurance for instance, FMLA is then seen as paid. That means you can’t require that employee to use their PTO toward FMLA leave.
Essentially, while your employee is out on FMLA leave, they would also be out on PTO so when they return, they wouldn’t have any PTO saved up beyond what they accrue during leave (if your policy allows for that). This can be beneficial for your team—they get paid even if your employee benefits package doesn’t directly compensate them during FMLA leave.
This type of policy also saves you money in the long run. If an employee exhausts their PTO bank and FMLA leave separately—like going on vacation after taking three unpaid months off to care for a sick relative—they’re out of work for longer, reducing your team’s productivity.
3 Pictures That Will Help You Finally Understand Your Profit and Loss StatementFinances and Taxes
If you do allow employees to use PTO toward FMLA leave, their PTO should continue to accrue—or not—according to your company’s policy. Make sure this is clearly spelled out.
Talk to a small business HR expert or employment lawyer to make sure you’re staying compliant with the laws surrounding PTO accrual during FMLA leave.
Can employees earn paid vacation time for other types of leave?
Follow your PTO accrual policy for all types of leave, including:
- Parental leave, such as maternity or paternity leave
- Short-term disability
- Workers’ comp and injury leave
- Bereavement leave
- Any other type of leave you offer
For example, if you provide three months of paid parental leave and your policy indicates that PTO continues to accrue during paid leaves, it should accrue during parental leave. However, if you offer three months paid and three months unpaid, the PTO will stop accruing after the first three months.
When it comes to PTO accrual, stay consistent and include a vacation accrual policy in your employee handbook. Be sure to explicitly state if employees are expected to take PTO concurrently with FMLA or other types of unpaid leave.
Remember, it’s your decision whether your employees earn PTO while on vacation or FMLA leave—but once you’ve established a policy, following it consistently is key.