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Should You Adjust Your Paid Time Off (PTO) Policy During COVID-19?

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If your employees are back to work, you’ve probably established new policies to comply with social distancing guidelines. You’ve most likely worked out new policies regarding how to handle documents, time tracking, customer service, and more. You have gotten this far, but have you considered taking a look at your current time off policy?

Most people can’t travel like they used to, which means that many employees aren’t using their PTO as they normally would. What are you going to do with those hours? Allow them to rollover their hours to the next year? Are you going to implement a use-it-or-lose-it policy? There’s a lot to consider now that the coronavirus has changed the way people work. What are you planning on doing with your PTO policy?

Why You May Consider Changing Your Time Off Policy

Traveling is a lot more difficult now that the coronavirus has taken its toll on the world. With closures all over the states, more people are canceling their travel plans, including employees. They don’t have a reason to take time off anymore. Since they’re not using their time off, you may want to consider changing up your PTO policies. Are you going to create new accrual caps? Are you going to implement a use it or lose it policy? It’s time to start thinking about your next steps. 

Providing vacation time is proven to create happier and more motivated employees. In fact, recent studies show us that 68% of employees are much happier when their employers encourage vacation time. Leaving work for as little as a day is good for employees, so you should certainly encourage them to take their time off if they’ve earned it and create policies that enable them to use their PTO as needed.

Time Off Under the Families First Coronavirus Response Act (FFCRA)

As a reminder, if you have under 500 employees, they are eligible for the FFCRA. The FFCRA gives your employees up to 80 hours of paid sick leave due to COVID-19 reasons. This means that you are required to give employees time off if they’ve been impacted by the coronavirus. This applies whether they have the virus themselves or if they’re taking care of someone else. Employees are also eligible for an additional 10 weeks of paid leave at ⅔ of their pay. This is important to keep in mind as you create your time off policies because you must prepare for these extra absences if they occur. You can read more about the FFCRA in our article Families First Coronavirus Response Act (FFCRA): Employee Guide

Rollovers Versus a Use It or Lose It Policy

Rollover policies are quite common and are great for employees who don’t always use their vacation hours in a year. Rollover policies allow employees to carry over their remaining hours for use the following year. Use it or lose it policies, on the other hand, prevent employees from using their accrued PTO hours by a certain date. If they do not use their vacation hours by the end of the year, they expire.

Generally, most states do allow use it or lose it policies, but some states actually do not allow this practice. In California, for example, they consider PTO time as hours that employees have earned; therefore, you cannot take away their hours and implement a use it or lose it policy. You must either pay your employees for their remaining accrued hours or let them roll over their hours to the following year. That being said, it’s important to look into your state’s rules before implementing either policy. 

Here are some pros and cons regarding use it or lose it policies: 


  • If they know they are going to lose their hours at the end of the year, they may be more inclined to use their vacation hours throughout the year. 
  • Employers won’t have to worry about paying out employees at the end of the year if they don’t have unused vacation time.


  • Some states don’t allow it, which can pose a problem for you legally if you aren’t compliant.
  • Employees may scramble to use their vacation time at the last minute, leaving your staff shorthanded. 

What’s the best practice during the pandemic? Well, it’s likely that your employees may not use all of their hours this year, since their travel plans were likely interrupted by the pandemic. If you don’t have a rollover policy, you might consider encouraging your employees to take sick time throughout the year so they don’t all end up taking time off at the same time.

You can actually legally require employees to use their PTO, unless your state has specific PTO rules. If you don’t want your employees to scramble at the end of the year to use their hours before they lose them, you may want to consider a rollover policy. With a rollover policy in place they may be more inclined to take their vacation time throughout the year at a steady rate. 

Capping Their Hours

Many employers are weary about rollover hours because they don’t want their employees to earn copious amounts of time off. An easy fix for this is placing an accrual cap on their time off balances! Accrual caps stop employees from accumulating PTO after they’ve reached a certain threshold. If you plan on allowing a PTO rollover, you should certainly consider implementing a cap on their hours. This will ensure that they’re not earning tons of hours that they may never use. This is a great scenario for both employers and employees because the employers have control over how many hours an employee can accrue. As a result, the employee feels respected because they aren’t losing hours they’ve earned. 

Here’s how an accrual cap works:

If an employee earns 120 PTO hours in a year, you can cap that employee’s hours at 120 hours for the year and call it a day. Easy peasy! To make it slightly more complicated, you can also choose to have a cap that’s greater than the amount of hours they earn in a year. Some employers, for example, like to give employees the chance to roll over up to an entire year’s worth of hours. Using the numbers above, this means that the employee can earn up to 240 hours and cannot earn any more beyond that. 

You may want to think about implementing an accrual cap if you notice that employees aren’t using their vacation time as they usually would. 

Creating Time Off for COVID-19 Reasons & Letting Employees Borrow Hours

As mentioned previously, you may expect employees to take time off due to the effects of the coronavirus. They may have to take care of themselves or of a loved one, and you must provide them with time off under the FFCRA. If an employee ends up using FFCRA benefits, you’re definitely going to want to document when they’re using that type of leave. Since it’s separate from your normal PTO policy, you might want to create a time off category specifically for FFCRA leave.

In addition to FFCRA leave, you also must keep in mind that some of your employees might have children who are doing their schooling from home. Are you going to give additional PTO to those who must work while simultaneously watching their children? Or, are you going to allow your other employees to potentially give their unused hours to employees who need it? It’s a common practice to allow employees to give their earned time off to another employee who may need it. Employees can legally volunteer to donate their accrued hours to another employee as long as they aren’t encouraged or required to do so. 

Borrowing Hours Policy

If you decide to let employees donate their time to another employee in need, keep in mind that you must create a solid policy. Outline the eligibility criteria and what it entails for those who wish to participate. Most business owners put all donated hours in one single bank for all qualifying employees to use– that way one employee isn’t getting more hours than another. 

You must also acknowledge the fact that employees earn different wages, so their transfer rate may be different. For example, when someone makes $10/hr and receives hours from a person whose rate of pay is higher at $20/hr, that person would get double the amount of hours. 

Paying Out Their Hours

Most states do not require payouts, so this may not even be on your radar. Nonetheless, some employers have allowed employees to trade in their unused hours for monetary compensation. You may pay an employee for hours they decide not to use which gets deducted from their time off bank. You can do this simply by finding their hourly rate and paying them for the hours they’ve accrued. For instance, if your employee gets $50,000 a year, their hourly rate is around $24. Let’s say this employee has 37 hours they would like to trade in. You would multiply 24 by 37 and get $888 dollars.

No matter what adjustments you make, it’s always very wise to consult with an HR specialist about your time off policy. They’ll help make sure that you’re staying compliant with your state’s rules, that way you’re not left with legal trouble down the road. After you consult with an expert, you should relay your updated policies immediately to your staff so they have a comprehensive understanding of the new policy. Make sure that you allow them to ask any questions and be ready to clarify any confusion.

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