Two Keys to Getting Paid Time-Off Right

Properly handling paid time off accruals is often a difficulty and a challenge. There are two main steps to really making sure that you get it right and can stay out of conflict with your employees.


1. It’s critical to have a written policy at your company detailing how vacation and paid time off is accrued.

Say you offer paid vacation, paid sick leave, paid time off or paid holidays, and you have no formal policy in place. Legally, you have an implied policy,based on your history of awarding paid benefits in the past — and any verbal or written agreements with individual employees.

So if you make a deal with a new employee to get two weeks more annual vacation time than other staff members, that additional time could become part of your “policy” in a lawsuit. A court could decide how much you owe employees.

2. It’s critical to have someone try to translate those words into actual calculations and then test them. 

It is amazing how many times we have taken a company’s written paid time off policy and translated it into calculations and gotten the response “But that’s not how we actually do it”.Your time-off benefit policy should be written in clear language that is easily understood by the typical employee. In some cases, even companies with written polices have been forced to grant employees more benefits than they intended. That’s because their policies had vague or confusing formulas for determining how employees earned and accrued paid time off. Paid time off is inherently a calculation. Writing something in words that clearly indicates the properly calculation is extremely difficult. By asking a qualified payroll provider like PayNorthwest to turn your words into calculations and then checking them will make sure that your intent and your results line up.