How Paid Time Off (PTO) Works For Hourly Employees

Knowing how PTO works for hourly employees can benefit both the employer and the employee. For the employer, it can help ensure compliance with labor laws and regulations regarding paid leave. For the employee, it can help them plan and take time off in a way that maximizes their pay and benefits. Additionally, having a clear PTO policy can help prevent confusion and disputes about time off.

In this article, we’re going to touch on:

1. What’s PTO and how it differs from other types of leave
2. When and how can employees start accruing PTO?
3. How PTO is calculated
4. How employees should request time off and the procedures for approval or denial
5. What happens to PTO when an employee leaves the company or retires
6. PTO policy compliance with state and federal laws and regulations
7. The impact of PTO on an hourly employee’s pay
8. How PTO works in the event of job termination or layoff

What’s PTO and How it Differs from Other Types of Leave

PTO, which stands for “paid time off”, is a benefit some employers offer that lets employees take time off work while still getting paid. 

It combines different types of leave, like vacation, sick, and personal leave, into a single pool of time. This means employees don’t have to say why they aren’t at work and can use their PTO days for any reason, like vacation, illness, personal or family emergencies, or anything else.

PTO vs sick leave 

Sick leave, on the other hand, is time off that an employee is given when they’re sick or hurt and can’t work. It is usually different from paid time off and vacation time, and sometimes it is required by state law. Employers usually need a note from a doctor to give sick leave.

It’s important to remember that PTO is different from other types of leave, like sick leave, which is meant for when an employee can’t work because of illness or injury and is usually different from PTO and vacation leave. Employers usually need a note from a doctor to let someone take sick leave, and sometimes it’s even required by state law.

PTO vs vacation leave

Vacation leave, also called annual leave, is time off that employees are given to do things like go on vacation or travel for fun or personal reasons. It is usually different from sick leave and PTO, and it is usually earned over time based on how long an employee has worked for the company or how the company does things.

When and How Can Employees Start Accruing PTO?

When an employee starts working for a company, they typically start accruing PTO. The specifics of how PTO accrues, such as the accrual rate and maximum accrual, vary from company to company and can be outlined in an employee handbook or employment contract. Some companies have a “use it or lose it” policy where employees can’t carry over unused PTO from one year to the next, while others allow employees to accrue PTO indefinitely and take it at their discretion.

How PTO is Calculated (e.g. Hours Worked, Years of Service, etc.)

Here are examples of how PTO can be calculated based on different methods:

PTO calculated based on hours worked

Let’s say an employee earns 1 hour of PTO for every 40 hours worked. 

If the employee works 1,600 hours in a year, they would earn 40 hours of PTO (1,600 hours / 40 hours = 40 hours PTO).

PTO calculated based on years of service

A business can set their PTO accrual policies to be based on years of service. For example: employee earns 10 days of PTO in their first year, 15 days in their second year, and 20 days in their third year. In this case, if an employee has been working for 2 years, they would earn 25 days of PTO (10 days + 15 days = 25 days).

PTO calculated based on hours worked and years of service

Let’s say an employee earns 1 hour of PTO for every 40 hours worked and an additional 3 days of PTO for every year of service. If an employee works 1,600 hours in a year and has been working for 2 years, they would earn 40 hours of PTO (1,600 hours / 40 hours = 40 hours) + 6 days of PTO (2 years x 3 days = 6 days) for a total of 46 days of PTO.

PTO calculated based on a set number of days

Let’s say an employee gets 15 days of PTO regardless of years of service or hours worked. In this case, the employee will have 15 days of PTO.

It’s also common for different levels of seniority in a company to have different accrual rates. Keep in mind that these are just examples and that each company has its own PTO policies. If you want to know how your employer handles PTO, it’s best to ask them.

How Employees Should Request Time Off and the Procedures for Approval or Denial

Employees usually ask for time off by sending their supervisor or the human resources department a request form or email. The request should say when the time off is needed, why it is needed, and any contact information that is important. It’s also a good idea to ask for the time off as far in advance as possible, so the employer has time to plan for coverage during the employee’s absence.

Whether a request for time off is approved or denied depends on the company’s policies and procedures. Usually, the employee’s boss or supervisor will look over the request and decide if it can be granted based on what the company needs and how busy the employee is. The request will then be approved or denied by the boss.

In some companies, the employee may have to submit their request through an online system or a physical form, and the supervisor may have to approve or deny the request through the same system. Some companies also have rules about how much PTO an employee can use at once, how much they should still have left at the end of the year, and if there are dates when PTO can’t be used.

PTO Carryover and Rollover Policies

Most of the time, employees ask for time off by filling out a form or sending an email to their supervisor or the human resources department. The request should say when the time off is needed, why it is needed, and any contact information might be useful. It’s also a good idea to ask for time off as early as possible, so the employer has enough time to plan for coverage while the employee is away.

Whether a request for time off is approved or turned down depends on the company’s rules and policies. Most of the time, the employee’s boss or supervisor will look over the request and decide if it can be granted based on what the company needs and how busy the employee is. The request will then be approved or turned down by the boss.

In some companies, the employee may have to fill out a form or submit a request online, and the supervisor may have to approve or deny the request using the same system. Some companies also have rules about how much PTO an employee can use at once, how much they should have left at the end of the year, and if there are dates when PTO can’t be used.

What Happens to PTO when an Employee Leaves the Company or Retires

The policy for what happens to an employee’s unused PTO when they leave a company or retire can vary depending on the specific company’s policies and practices. Some possible options include:

PTO is forfeited: In some cases, an employee may forfeit any unused PTO when they leave a company or retire. This means they won’t be paid out for any unused time and won’t be able to take it with them.

PTO is paid out: In other cases, an employee may be paid out for any unused PTO when they leave a company or retire. This means they will receive a lump sum payment for any unused time they have accumulated.

PTO Policy Compliance with State and Federal Laws and Regulations

When it comes to PTO policies, it’s important to make sure they comply with state and federal laws and regulations to avoid legal issues and potential penalties, such as the Family and Medical Leave Act (FMLA). 

Here’s a quick rundown of how to make sure your PTO policies are compliant:

• Offer a minimum amount of PTO: Some states and municipalities have laws that require employers to offer a minimum amount of PTO to employees. For example, California requires employers to offer at least 24 hours of paid sick leave per year.
• Provide unpaid leave: The FMLA requires employers to offer up to 12 weeks of unpaid leave for certain family and medical reasons.
• Protect their job: Both the FMLA and the Americans with Disabilities Act (ADA) require employers to protect the job of employees who take leave. This means no discrimination and reinstating them to their previous position or an equivalent one when they return.
• Follow state and federal regulations: Employers must ensure their PTO policies comply with all state and federal laws and regulations, like the Fair Labor Standards Act (FLSA) which requires employers to pay employees for hours worked, including overtime for working over 40 hours a week.
• Provide notice: Employers must provide notice to employees about their rights under state and federal laws and the company’s PTO policies and the process for requesting leave.

Ways PTO is Tracked and Managed by the Employer

Managing and keeping track of PTO depends on the policies and procedures of each company. But here is a general overview of how employers usually keep track of and manage PTO:

PTO accrual: Employers usually set up a system for how much PTO employees can earn.

How much PTO an employee will get and how often. For example, an employer may give employees a certain number of hours of PTO per pay period or require them to work a certain number of hours before they can get PTO.

PTO requests: Usually, employees have to ask for PTO ahead of time, using a system like an online system, an email, or a paper form. This process gives the employer a chance to look over the request and say yes or no based on the company’s rules and the employee’s work schedule.

Employers usually keep track of PTO with a time and attendance system, like an online system, a spreadsheet, or a form that is filled out by hand. This lets them keep track of how much PTO an employee has used and how much is left.

PTO approval: Employers usually review and approve PTO requests based on their availability and the company’s policies. They may also think about things like the timing of the request, how busy the employee is, and whether or not other staff members are available to cover for the employee’s absence.

Employers usually let employees use PTO for different things, like vacation, personal time, and medical leave. Some employers also let workers use PTO for things like funerals, jury duty, and other things.

PTO payout: Employers usually have a policy about what to do with an employee’s unused PTO when they leave the company or retire. Some employers will pay the employee for unused PTO, but others might not.

Most employers have a person or department in charge of managing PTO, like a supervisor or the human resources department. This person or group is in charge of keeping accurate records, approving requests for time off, and making sure that company rules and state and federal laws are followed.

Employers need to have a clear, well-written PTO policy in place to make sure PTO is tracked and managed in a fair and consistent way. Employers should also make sure their employees know about the PTO policy and understand how to ask for and use PTO.

The Impact of PTO on an Hourly Employee’s Pay

Depending on the rules and policies of the company, PTO can have a big effect on an hourly worker’s pay. Here are a few ways paid time off can be set up that can affect an hourly worker’s pay:

• Hourly workers will receive their regular hourly pay for any hours taken off as PTO. This ensures employees do not lose money when they take time off.
• PTO is usually earned over time, based on the number of hours worked. This means employees will earn a certain amount of PTO each pay period or may have to work a certain number of hours before earning PTO.
• Some employers may deduct PTO from an employee’s pay if they do not have enough PTO to cover the time taken off. This can result in lower pay for the PTO hours.
• When an employee leaves a company or retires, the employer may not pay out any unused PTO. This means employees cannot take their unused PTO time with them or get paid for it.
• Some employers may pay out unused PTO in other situations, such as when an employee leaves the company or retires. This means they will receive a lump sum payment for any unused PTO.

Employers must ensure their PTO policies are in line with state and federal laws, such as the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA), which may require employers to pay employees for all hours worked, including overtime, and to give unpaid leave.

How PTO Works in the Event of Job Termination or Layoff

How PTO is handled when someone loses their job or is laid off depends on the company’s policies and procedures. But here are a few things that can be done with PTO if you lose your job or are laid off:

PTO is lost: When an employee is fired or laid off, they may lose any PTO they have not used. This means they won’t get paid for any time they didn’t use and won’t be able to take it with them when they leave.

PTO is paid out: If an employee is fired or laid off, they may get paid for any PTO they didn’t use. This means they will get a lump sum payment for any time they haven’t used but have saved up.

PTO is used as a part of the severance package: Employers can include unused PTO in the package they give to employees who are fired or laid off. This means employees will be able to get some of their severance pay from their unused PTO.

PTO is transferred to a new employer. Some employers may let employees transfer their unused PTO to a new employer. This means they can use the time they didn’t use at their old job at their new one.

More on PTO vs. Sick Leave for Hourly Employees

While PTO combines different types of leave, it’s important to understand that sick leave often has stricter requirements for hourly employees. Sick leave is specifically meant for when an employee is unable to work due to illness or injury. Employers may require a doctor’s note to verify the need for sick leave. This differs from PTO, which is broader and employees may use it without providing such documentation.

Understanding State Laws

PTO policies can be influenced by your specific state’s laws. Some states may have laws that mandate employers to offer a minimum amount of PTO, whether it’s paid or unpaid. It’s important to be aware of your state’s regulations around PTO. You can find a helpful resource with a breakdown of state laws regarding PTO on the Department of Labor website.