Do You Know Your Accrued PTO Liability?

In the last decade, companies of all sizes have transitioned to PTO banks, which combine vacation days, personal days, and even holidays into one lump of time that employees can use for any reason.

By integrating all these hours into one pool, employees can take days off at their discretion (with supervisor approval, of course) when they need them.

PTO banks are easy to administer, and provide employees with flexibility and privacy, among other benefits.

Most employees value the flexibility of a PTO bank. With vacation and personal days bundled, they have the option of using their paid time off when they need to.

  • They can use their PTO without worrying about excessive oversight or micro management.
  • For employers, this can become a perk for workers who value an extra level of autonomy where scheduling is concerned.

The Disadvantages of PTO Banks

While PTO banks are widely used, there are some potential disadvantages to them, especially if they are poorly managed.

  • For one, PTO banks can have a negative effect on a company’s books. That’s because many states consider PTO days as vacation days, and see them as being an asset that employers “owe” to employees if and when they leave the company. (However, in states without laws addressing this, an employer’s policy may determine whether or not they’re responsible to pay out accrued PTO when employees leave.)

There can be issues on the employee side as well:

  • In some cases, PTO banks give employees fewer overall days than they’d had when vacation and personal days were separate.

No matter how you handle PTO and vacation time, it’s vital that your company is able to do the following:

  1. Identify your accrued PTO liability quickly and easily. This includes PTO that employees have earned to date, but have not yet used.
  2. Project accrued PTO liability into the future.

Can you?

Regulatory compliance affects every business with employees. Our infographic, “How stratustime Helps Businesses Stay Compliant,” offers details and insight into how our time & attendance solution can help you protect your business from compliance and regulatory issues.

See the Infographic

How to Manage Your Company’s Accrued PTO Liability

Imagine maintaining all of a company’s accrued PTO with paper and pencil. Besides the obvious human error that inevitably comes with this type of tracking, it’s also an extremely inefficient way for any company to be able to gauge its accrued PTO liability.

Out of Office. Gone on Vacation!

That’s where an integrated time & attendance system can be helpful.

With an integrated time & attendance solution such as stratustime, you can use the software’s Time Off Information Report feature. This lets your CFO schedule an end-of-month check on accrued PTO balances of every employee within the company.

Doing so can be especially valuable if your business is dealing with a cash flow crunch:

  • Let’s say you have 500 employees at an average pay rate of $25 per hour with an accrued PTO bank that caps at 180 hours. If you experienced a sudden loss of 5% of your staff, your company could be liable for $112,500 in paid out PTO accruals if mandated by your jurisdiction, or your company policy.
  • Without safeguards such as caps on PTO banks, you might inadvertently accrue more than the amount of cash reserves your company has on hand.

Beyond simplifying how you identify accrued PTO liability, stratustime can also help support HR and finance teams.

  • When it’s time to engage in comprehensive audits of accrued PTO usage, you can pull and compare month-to-month or year-to-year reports.
  • Additionally, these analytics can help you drill down into trends taking place in different departments, locations, and even by manager.

With the right data at your fingertips, stratustime can help you gain true insight into your company’s financial liabilities, as well as your departmental culture.

For instance, why does one department continue to bank PTO, while another department’s employees use what is accrued at various times throughout the year?

Answering these types of questions can be yet another piece in solving your PTO liability puzzle, and helping you discover more about what’s going on inside your company.

Accurately tracking time & attendance is vital when it comes to managing vacation and personal days. Talk with one of our professionals today about how stratustime can help support your time & attendance needs.

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