Addressing Accrued Paid Time Off at the End of the Year

More than 70% of all employees in the U.S. receive paid time off in one form or another. Also known as PTO, paid time off can be offered as vacation time, personal days, sick days, and paid holidays. How a company handles PTO depends on its policies governing how and when the time can be used, and whether it can be accrued or not.

The point of this post is to address accrued time off at the end of the year. Assuming your company has an accrual policy in place, the first question to ask yourself is this: what options do employees have with remaining accrued time?


When Accrued Time Expires

Perhaps your policy dictates that all accrued PTO expires at the end of the year. If that's the case, be prepared for an onslaught of vacation requests during the final month of the year. Employees do not like to waste their PTO, so they are more likely to take extensive time off during the holiday season.

Part of your company policy might allow you to buy out unused PTO for cash. This is a viable option if you're worried you won't have enough staff to cover business during the holidays. But you must decide which employees actually get to take their time off and which ones have to trade it for a cash payment. Tread lightly here.


When Accrued Time Can Roll Over

Perhaps your company's policy allows accrued time to roll over into the next year. You will probably not have as many challenges with staffing issues this time of year, but that doesn't mean things will be easy. Your payroll department has to get with employees before the end of the year to figure out who's doing what with their accrued time.


Accrued Time Post-Termination

Perhaps the biggest concern relating to end-of-year accrued time relates to employee termination. Whether an employee is fired or voluntarily quits, something has to be done about accrued PTO in the aftermath. This is a more common end-of-year scenario than many employers realize.

The end of the year is a good time for employees looking to move on to actually do so. They finish out their current employment just before Christmas, then take a week off before starting their new jobs after the first of the year.

Getting back to accrued PTO, the tricky thing here is knowing what to do by way of both company policy and state law. Different states have different regulations about compensating for accrued PTO. In some states for example, employers are required by law to pay accrued PTO within 30 days of the end of employment. Other states are a bit more lax.


We Are Here to Help

All of this may be terribly confusing to you if you still handle payroll in-house. We get it. Payroll in the modern era is more complex than it has ever been. Rest assured that BenefitMall is here to help. We are experts in all things payroll – including handling accrued PTO at the end of the year.

We offer a full range of payroll solutions for businesses of every size. From simple, cloud-based solutions to full-service solutions that cover every aspect of payroll and benefits administration, we have a plan right for you. Also note the we offer customized payroll solutions for the restaurant and construction industries.

It is that time of year when employers start working on addressing accrued PTO. Make sure your payroll department is up to the task. You do not need PTO headaches this time of year.