Paid-time off banks (PTOs) are becoming popular with many companies these days. What are PTOs? They are “banks” of time off for an employee, which combines vacation days, sick leave, personal days, and, in some cases, holidays, all into one lump of time that employees can use for any reason.
Many companies favor PTO banks because they help trim the liability you are required to carry on your books to cover accrued vacation. That’s because the new plans typically come with limits on the number of days employees can build up in the banks or roll into the next year. PTO banks also help streamline benefits administration and cut the cost of absenteeism.
There are disadvantages to using PTOs as well. For example, they may have a negative effect on the books. Most states regard PTO days as vacation days, which means they are an asset owed an employee when they leave the company. Sick days, when kept separate, are generally not considered a liability on the books. Also, PTO banks can be costly to implement particularly if you have several longtime employees that have accumulated large stockpiles of sick days and vacation time.
The government does however appear to be supporting the idea of PTOs. Effective at the end of the year, companies will not be required to pay out cash to employees who have accrued vacation time, but can instead roll the equivalent amount into a health reimbursement account. Since it is an accrual account, employers wouldn’t be responsible for the cash until the employee uses it to cover medical expenses.