Retention Perk - Understanding the PTO Policies of California

As a startup business in California, are you working to formulate the best policy to provide time off for your employees? One debate is whether to offer sick time and vacation time or combine them into a single bank, known as paid time off, or PTO.

Here’s a look at current law, which may help drive your decision:

PTO Versus Vacation and Sick Time

Most California employers are not required to provide any kind of sick leave, vacation or PTO benefits. A notable exception is companies with employees in San Francisco.

If you do provide these perks, you need to know that:

  • PTO time is accrued as the working year progresses. For instance, if your policy grants two weeks of PTO per year, an employee earns one week after working for six months. In the event of a termination, the company must then pay an employee all accrued but unused PTO time.
  • Sick time, in contrast to paid vacation or PTO time, is a non-accruing benefit. Employees must “use it or lose it.”

A Written Policy is Essential

Clearly defined – and written – PTO policies should describe all the details of your company’s program, including:

  • The point at which PTO accrual begins. It is permissible to designate a specific period of time at the start of employment, during which an employee does not earn PTO, i.e., a probationary period or the first six months.
  • Limits regarding which employees are eligible for PTO. Make it clear if probationary, part-time, temporary or casual employees are excluded from your policy.
  • Maximum limits for accruing PTO time, after which employees are required to actually take time off before they can accrue any more.
  • A requirement that employees request PTO in writing.
  • Any additional pertinent guidelines. For instance, your policy should describe restrictions regarding when employees may or may not take PTO. For example, an accounting firm may not allow PTO during tax preparation time or a manufacturing plant many impose limits during seasonal peak production demand periods.

A Note on “Kin Care”

According to California law, 50 percent of an employee’s yearly PTO accrual can be used for “kin care.” This is defined as time off to care for a child, parent, spouse or domestic partner.

An Alternative to Paid Time Off

Now that you know some of the details involved in administering a PTO policy, remember, it’s not a requirement in most of California. But you still want to do the right thing for your employees. A viable alternative is to offer the option of accruing paid time off on a results-driven basis. This concept works on the premise that if an employee maintains a successful performance track record and achieves desired results, he or she can then simply ask for needed time off.

Especially in the case of startup businesses, this can be an innovative and motivating way to keep costs under control while building morale and a sense of ownership.  

just remember to think bigger! 

As the CEO of Fillmore Search Group, I believe the main ingredient to our continued successes was our culture.  Having a fair, autonomous PTO policy was a key ingredient to helping our people stay motivated and engaged.  At first, people thought I was crazy as my life would be easier if I could just make it black and white.  However, what I found was that if I was willing to put up with the gray areas of when it was appropriate for someone to take time off given their recent performance (especially in an emergency situation) then I would have a lot happier staff!  I believe this feeling of "I write my own schedule so long as I hit my goals" is a key perk that people are missing out on today.  

True "A Players" want a Results-Driven Environment to work in.  If they can do in less time what it takes someone all day to do, they want to be rewarded for that.  They do not want to sit there and watch the clock.

All in all, just remember to think bigger!  Yes, it's easier to say "everyone must work the day after Thanksgiving" but did you really put thought into that?  Do people get to earn their way out of not having to do it next year? What's your culture?  What's your message?  What's your retention strategy!?


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