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Vacation Time vs. PTO: What’s the Difference?

Vacation Time or PTO?Are you trying to decide whether to offer a vacation/sick time or a Paid Time Off (PTO) policy to your employees? Do you know the real differences in the plans? Understanding the specifics of each option is the first step to deciding which is best for your business.

Vacation policies are intended 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 can be used for any purpose the employee chooses.

Check State Requirements

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.

Payout of Unused Time Off

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.

Mandatory Sick Leave Ordinances

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 employees accrue PTO fast enough
  • Allowing carryover of PTO 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.

Put it in Writing

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 operates.

Whether you offer a PTO or Vacation policy to your employees, Execupay can help with leave management support. Give your employees instant access to time-off balances and the ability to submit leave requests online with our Time and Labor Management offering. Learn more >>