- December 14, 2017 at 3:59 pm #135465
As far as the company cost to providing PTO, What is the best way to handle that?
Is this a cost the company runs with completely out of pocket or is there a way to deduct from pre-taxed dollars?
Thank you!December 14, 2017 at 4:15 pm #136233
Thank you for your question. I imagine it’s one a lot of our readers have.
I like to think of PTO as an investment in the well-being of your employees. But yes, it is a cost to you – in terms of payroll. So for instance, let’s say you offer 10 days of PTO, for an employee who is paid $15/hour, PTO will cost you $1200 a year in payroll costs for that employee.
The reason I say PTO is an investment, is imagine that employee leaves you (because you don’t offer PTO), and you have to replace that employeee …
Recruitment, hiring and training often cost 16% of annual salary (according to ZaneBenefits). So that same employee getting $15/hr, 2080 hours a year would cost nearly $5k to replace. ($15 hr x 2080 payroll hours a year = $31,200/yr x.16 = $4992).
Here are some articles that may help you as you plan your PTO policy. The first article provides a free template to help you get started.
Best of luck to you!
p.s. There is one scenario in which PTO is deductible by the employer – that’s when the employee chooses (and the employer allows) their PTO to be donated to a charity. In that case, you’re paying the charity the $ amount of the PTO that the employee has forfeit, and then yes, you can write that $ amount off as a charitable donation. For small businesses, this is a pretty uncommon practice, but I wanted to mention it for other readers who might also see your post.
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