Vacation Renewals

Do you allow roll-over, cash out, maximum levels or some combination?

It’s a new calendar year and, just like December may be the cut-off date to max out your spending, it’s often the indicator that employee benefits accrued in the last year have reached their ‘expiration date’. Or have they? Does your company’s handbook refer to an employee policy of rolling over (into the next calendar year) benefits from the prior year? And, regardless of which way you fall on this question, do your employees know and do they know what procedures they must follow to keep those unused days from the previous year?

Americans have achieved the dubious distinction of nearly using the least number of their available time off – vacation, personal days and sick days. From an employers’ perspective, that may appear to be a good thing to enhance productivity and predictable employee appearance. Yet, over time, this can easily turn into a bad thing with increased stress and impaired family relationships showing up in decreased productivity and team-related problems. And, if your company handbook does not specify any procedure to formally roll-over annual vacation days or require some specific advance notice of when vacation is planned or even not allowed (common during a business’ ‘high season’, as an example) the simple act of taking vacation could easily cause tremendous problems.

Interestingly, most states – including Montana – do not require private sector employers to provide vacation, paid or unpaid. However, if you do provide it – regardless of your rollover policy – once it has been earned, it is considered wages. So, should an employee leave or be terminated, they are owed it in dollars.  If the employer prefers a Paid-Time-Off, commonly referred to as a PTO policy, that is neither earned nor accrued by the employee and is not paid out upon separation of employment.  As you might expect, we recommend you engage an expert to write your policy. 

And, by the way, lack of roll over policies (often called ‘use it or lose it’) are NOT permitted in Montana. However, you can define time-off limitations or set maximum accrual amounts. Again – something that must be placed in your employee handbook.

Now, from the purely recruitment perspective, a roll over policy is attractive to employees and a benefit that can give an employer an edge when competing for employees. As work habits have changed significantly throughout the pandemic cycle, including unlimited Personal Time Off, in addition to roll over time in a benefits package, has become popular with employers who value results rather than time spent at the desk. It’s also popular with employees who manage their time well, whether in an office or at an off-site location.

Yet, during the pandemic, employees who found themselves working at their kitchen table rather than at their office desk, took less time off than in the past. This is partially due to a need to pick up responsibilities not handled by ill colleagues and partially due to the difficulty of knowing when it’s quitting time when you don’t have to literally get up and leave to go home.

So, as you can see, not only is your vacation policy a key part of how a new employee may choose your company, it’s an important part of how you plan a predictable level of productivity when much of it is now expected to be produced out of your sight and, perhaps, no longer ‘9 to 5’. One way to handle this changing benefit is to ensure your employee or operations handbook is regularly reviewed, updated and enforced. TogetHR Consulting is your partner to make this happen.

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