Beginning on July 1, 2015, California employers will need to provide paid sick leave to pretty much all full-time, part-time, temporary and even on-call employees. As the year end approaches, many employers are revising their vacation, sick, and paid time off (PTO) policies to conform with California’s new requirements. If you haven’t mastered the nuances of California’s new paid sick leave laws, the DLSE’s FAQs provide a pretty good summary. But understanding the requirements is only the beginning. Figuring out how to amend existing policies is more complicated. Here’s why.
Many employers have combined sick and vacation leave into comprehensive PTO policies. Most employers provide PTO to make things simpler, and to prevent employees from having to misrepresent why they are taking time off.
However, adapting PTO policies to meet California’s particular sick leave requirements may result in providing benefits to a much broader group of employees than was originally intended. Providing PTO is more expensive than providing sick time, because PTO is considered wages that must be paid out upon separation from employment, while pure sick leave is not construed as wages and need not be paid out. Also many vacation/PTO policies are reserved for regular full-time employees, and do not apply to part-time, temporary or on-call workers. These differences are leading many employers to reverse the trend towards PTO and to go back to separate vacation and sick policies. That is certainly one option.
Another option is to do away with PTO or paid vacation all together. Many employers forget that there is no legal requirement to have paid vacation time. On the one hand, many employees like it, expect it, and may not choose to work for employers who don’t provide it. On the other hand, for many businesses, PTO/vacation simply isn’t necessary or even productive, because the employees who take vacation/PTO time off don’t bother to log it anyway. Many non-exempt employees simply take unpaid time off, and many exempt employees, tied to their electronic devices, work days they are supposed to be off and never actually use the accrued PTO/vacation time. Such employees wind up with the maximum accrual of vacation/PTO time that amounts to a sort of “bonus” upon separation of employment. Those payouts can be expensive for employers.
As you are considering your policies in light of California’s new sick leave requirements, think about whether your workforce really needs paid time off or vacation above and beyond what will soon be required sick leave. If not, it might be time to just provide sick leave, to allow employees to take other time off when business permits, and to judge employee productivity by accomplishments as opposed to days or hours worked.