This topic contains 4 replies, has 2 voices, and was last updated by Tim 7 months, 2 weeks ago.
Tim 10 months, 4 weeks ago
Transition from lump sum anniversary PTO to calendar year accrual
Hi. We are looking at transitioning FROM a PTO awarded as a lump sum on an employee’s anniversary to a calendar year accrual effective 1/1/19. Each employee has/will receive(d) their lump sum on their anniversary in 2018. My assumption is that on 1/1/19 each employee should receive a prorated accrual “Award” of PTO from when their last anniversary was. For example an October anniversary employee just received their lump sum so on 1/1/19 their prorated “Award” would be much less than an employee who received their lump sum on their anniversary in February. The puts everyone on level “Playing field” on 1/1/19. My question is this, on the 26 paychecks in 2019 should the employees each accrue whatever their full accrual rate is? For example, a 120-hour PTO employee would see roughly 4.6 hours accrued on each paycheck in 2019. Or should each employee receive some sort of prorated/reduced biweekly PTO rate based on when their anniversary was in 2018? I would say no to this b/c everyone was put on a level “Playing field” with their prorated 1/1/19 “Award.” Please respond with your thoughts. Thanks!4 Replies
Laura HandrickModerator10 months, 4 weeks ago
First off, kudos to you for offering PTO. I see no issue with wrapping up last years lump sum PTO, and starting off 2019 with an accrual. You’re on the right path going forward. But those who received a lump sum late in 2018, will not likely have used it all (unless it’s a use it or lose it plan), and therefore they’ll be able to roll over more PTO into 2019 than those who got, and used all their PTO earlier in year.
That may not feel fair to some. What you might want to do is run a spreadsheet — determine how much PTO each person got, when they got it, how much they’ve used, and how much they’re likely to carry over. Many PTO plans don’t allow carry over once accruals start, so it depends on whether you’re allowing them to rollover unused PTO or not.
The next thing you may want to do is run your changed plan past your employees, provide them 2-3 examples and get their feedback. You want PTO to continue to feel like a ‘benefit’ to your staff. If some feel they’re being penalized by the change, that could backfire as a ‘perk.’
I’ve attached some articles to help you consider options.
Tim 10 months, 3 weeks ago
Hi Laura. Thanks for the reply. We would likely allow employees to carry over unused PTO just because, like you said, employees with anniversaries later in the year would have just received their PTO. That is where the one-time prorated “Award” on 1/1/19 would come into play to make it fair. A 10/31 anniversary employee would receive a one-time 2 month accrual awarded on 1/1/19. For a 120-hour PTO employee, this would would be roughly a 20-hour “Award.” For an employee whose anniversary was on 2/28, there “Award” would be a 10-month accrual, which would be roughly 100 hours. This means on 1/1/19 both employees should have roughly 120 hours of PTO in their bank to use in 2019. My main question was if we use this method to bring everyone to a level playing field of PTO hours in their bank on 1/1/19, should a 120-hour employee still accrue a full 120 hours over their 26 paychecks throughout 2019? Or should they accrue at some reduced rate over those 26 paychecks? My thought is they should accrue at whatever their full accrual rate should be over their 26 paychecks in 2019 and beyond. If they are a 120-hour PTO employee, they would accrue at a rate of roughly 4.6 hours per biweekly paycheck. If an employee uses all 120 hours from their 1/1/19 bank throughout 2019, but accrues at a reduced rate throughout 2019, that employee will not have built up their full 120 hours during the 2019 year. What are your thoughts?4 Replies
Laura HandrickModerator10 months, 3 weeks ago
Your program is generous, and you may end up with employees having too much PTO. Consider doing this instead. On 1/1/19, allow no carryover of prior PTO (as employees will accrue it going forward). Start 2019 on a clean slate.
Instead, take a look at PTO balances on 12/31/18. Whatever is left in someone’s account, consider paying out as a year-end cash bonus. So the person who received a PTO balance on 10/31/18, that they hadn’t used, would receive it as a cash bonus instead. (Since it’s based on their hire/anniversary date, that’s fair).
And the one who received PTO on 2/1/18 will likely have used theirs already.
That can simplify your accounting. Starting on 1/1/19, everything should be accrual based, with no residual balances from the prior program.
In any case, run the numbers and then get feedback to reduce the chance of missing an important detail and upsetting staff.
Good luck!4 Replies
Tim 7 months, 2 weeks ago
I like your idea, but how do you answer to the employee that states,
“I used my 120 hours given to me on 2/1/18 as I should have AND was going to receive a fresh 120 hours on February 1, 2019. Now I’m only going to have only 9.23 hours accrued and available to use by February 1, 2019 b/c I start accruing on January 1, 2019. That’s not right/fair!”
We could let them “Borrow” against un-accrued time, but then you are creating a culture in which employees are going to feel like they are “Digging themselves out of a hole.” Essentially, that February anniversary employee who used all their PTO by 1/1/19 is going to be treated like a brand NEW employee, not a TENURED employee. If this is an employee who likes to build up their PTO before they start using it, they are essentially being penalized by a year for changing from a lump sum system to an accrual system. In a small office, this could cause “Strife.”
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