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Transitioning from Vacation to PTO Policy

My company is transitioning from a Vacation Policy, which included annual pay-out on Anniversary Date(s) to an Annual Accrual PTO Policy for our employees, to renew every January. My questions are: 1) Is the company obligated to still pay-out those employees who earned their vacation pay-out from the old policy?  2) When/how should we begin communicating with our policy changes as we would like this to take effect 2/1/17?

Paid time off benefits are not regulated by federal law. Thus, employers are generally able to adopt and amend such benefits as they wish. Though some states have adopted laws regarding vacation benefits, many simply require employers to adhere to their own policies. Still, it’s important to be aware of any applicable laws in your state.

Absent state law, employment contract, or collective bargaining agreement stating otherwise, it’s not required to provide a cash payout to employees who’ve earned vacation time under the old policy. However, any earned time should be allowed to carryover and not be forfeited. Requiring the forfeiture of earned time is illegal in some states. Even without a law prohibiting this, it’s just not fair to employees.

Most employees don’t like change, especially when it comes to their benefits. So, it’s important to communicate a new vacation policy in a timely manner to provide employees with ample time to ask questions and adjust vacation plans as needed. Also, sufficient time must be provided to finance/payroll to adjust take home pay as appropriate.

First, make sure the new policy is clearly written and easily understandable. Any ambiguous wording will only confuse employees and eventually you as the policy is implemented.

When distributing the new policy include a memo briefly explaining the reason for the change, the effective date, how the change will most benefit employees, any actions needed on the employees’ part, and the contact person for any questions.

Communicate the memo and new policy now via various media platforms i.e. email, company intranet, newsletter, paper mailing etc…Considering the size of your company you may want to require department heads to also distribute the memo and new policy during a staff meeting.

Some companies take a more personal approach by hosting town hall meetings. During these meetings employees are encouraged to ask questions and the employer is expected to answer them clearly and honestly. These meetings make employees feel that their opinions are heard but the necessity for them really depend on your company culture.

Send a reminder as the effective date approaches, like in January. And, remember to update your employee handbook with the new policy.

Lastly, address employee concerns quickly and honestly. Being open and forthcoming will help avoid negative responses from employees.


This entry was posted on Sunday, December 4th, 2016 at 1:51 pm and is filed under
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