Employers use paid time-off policies to define terms for use and accrual of employees' paid days, including personal, sick and vacation time. The policies set the employer and employee procedures for time-off requests and the rights and responsibilities of each party. A clear, inclusive paid time-off policy helps both workers and employers avoid problems with the benefit.
Paid time-off policies state the amount of days each employee gets according to her level of seniority and how much notice she must give when she wants to use a day. Paid sick days may not have a notice requirement, and all days typically must have supervisor approval for payment. The employer may award all days at the beginning of the year, or the employee may earn the days after he works the necessary amount of hours. Some policies set limits on how many employees can use paid time on the same date to avoid gaps in coverage.
A paid time-off policy tells the employee how many days she earns each year, how the days add up and what she must do to use the time, eliminating confusion on both sides. Clear, well-written policies protect an employer legally, since clauses and entitlements apply to all workers at the same level of seniority or in the same position uniformly, preventing discrimination.
Some states have laws regarding paid days for employees. The laws do not force employers to give employees paid time off, but do regulate some practices if an employee chooses to give days. For example, an employer in California must pay a fired employee for outstanding paid time because earned time is viewed as wages, but New York allows employers to set all paid time rules.
Some companies mandate employees use all paid time off in the calendar year or risk losing the benefits, while others let employees carry over time to the next year. Other businesses pay the workers for any unused days at the beginning of the next year. Payment may equal the entire day's value or a percentage, such as 50 percent.
A laid-off or resigning employee may receive payment for some or all the remaining earned paid time days for the year. Some employers include clauses in paid time-off policies voiding payment to fired workers.