HR Policy on Donating Vacation Days

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Something is usually going right when team members try to support each other with vacation days. If an employee without much paid time-off (PTO) needs time to deal with a death, family emergency or personal crisis, having others in the company who want to lend their support is a sign of team strength. However, companies vary widely in how they feel about the practice of donating PTO. Some company time-off and vacation policies can make donating time complicated and expensive for the company. Other companies encourage unity, and support sharing under the right circumstances.

Pay Issues

  • Employees don't all receive the same pay. This complicates and hinders vacation day donation policies. After all, if a higher paid employee donates to a lower-paid one, a company may save money. But if the reverse happens, it can lose money. It also creates difficulties with company accounting as companies budget labor costs to include benefits like vacation. The ability to share or donate vacation days makes it extremely difficult to accurately record PTO values on company balance sheets.

PTO vs. Vacation

  • Although people tend to think of days off as "vacation," companies have different ways of addressing employee paid absences. Some have vacation policies, which allocate a number of days per year for vacation, and a separate bank of sick days. Others use a PTO system in which employees accrue hours of time off based on hours worked. Any absence, regardless of reason, gets taken from an employee's accumulated PTO. Employees have broad discretion about why and when they use their earned PTO. Companies with PTO systems are more likely to allow donations because they set aside funds as employees accumulate their hours of leave. Companies with vacation policies frequently let unused vacation time expire if not used within a calendar year. Donating days prevents the expiration of vacation days and costs a business more than it might otherwise pay.

Law

  • Most states neither promote or prohibit policies on donating PTO. Companies that allow PTO transfers must carefully document transactions to show employees made the choice and authorized the donation. This is of particular importance because when employees separate from a company for any reason, they are entitled to the cash value of their accumulated PTO. Donating PTO is essentially transferring compensation among employees.

Morale

  • Employees who have the option to support one another with donations of PTO typically have a positive regard for their employers. Offering flexibility, freedom of choice and showing understanding for employee needs tends to have a positive effect on morale. Employers who elect to allow donations take on complications and costs in exchange for fostering a particularly employee-friendly policy.

References

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