Q: What is the difference between vacation time and PTO? We’re trying to decide which one to offer.
A: Vacation policies are intended to be used for the specific purpose of vacation or leisure time, and employers who offer vacation time generally offer sick leave as well. The alternative to having two separate benefits is a singular Paid Time Off (PTO) benefit, which may be used for any purpose the employee chooses.
Some states consider vacation and PTO (but not sick leave) to be accrued wages. Consequently, those states require payout of unused vacation and PTO at termination and have rules limiting use-it-or-lose-it policies. For example, an employee who resigns with three sick days and three vacation days would only have to be paid for the three vacation days. If the same employee resigned with six days of PTO remaining, they would need to be paid for all six.
If you are in a state, county, or city that requires employers to offer paid sick leave and you decide to offer a PTO plan instead, it is critical that you ensure the plan meets all the requirements of the mandatory sick leave law or ordinance. These requirements usually include letting employees use their time in small increments (e.g. one or two hours), ensuring that they accrue PTO fast enough, and allowing carryover into a new year. If you’re in one of these areas, you’ll definitely want to take a close look at the law or ordinance to ensure your PTO program is compliant.
Regardless of which benefits you choose to offer, you’ll want to make sure they are clearly articulated in writing and that all employees are made aware of what is available and how the policy or policies operate.
Learn more about Vacation vs PTO plans by downloading the infographic.