Is It a Sick Day? Vacation Day? With PTO, it Doesn't Matter

At small businesses this summer, many owners won't be trying to figure out whether employees will be counting it as vacation time, personal days or sick leave when they send texts or emails that say, "I'm not coming in today."

A growing number of companies combine vacation and sick time into one bucket called paid time off, or PTO. Staffers decide whether they're going to use the days for vacation, when they or a relative is ill, or for family events.

"You're saying to staffers, it's PTO, just take it. If you have a sick kid, need a personal day, you're really stressed out," says Gretchen Van Vlymen, a vice president at StratEx, an HR consulting firm based in Chicago.

Forty-three percent of companies offered PTO in 2016, up from 28 percent in 2002, according to a report from World at Work, an association of human resources professionals. The report said 51 percent of private companies, which would include small and mid-size businesses, offered PTO last year. The report was based on a survey of the organization's members.

One of the biggest pluses about PTO for small business owners is eliminating the administrative chore of tracking how many sick days versus vacation days their employees have used. That can be particularly helpful in the growing number of states, counties and cities where employers are required to allow staffers to accrue sick time, usually up to 40 hours a year depending on how many hours they work. With PTO, there's no need to track hours worked or accrued.

For Will Gadea, offering PTO to his five staffers means he doesn't have to be the arbiter of whether someone is really sick when they call him in the morning, coughing and asking for a day off.

"I don't want to make employees lie to me in order to use those days up," says Gadea, owner of IdeaRocket, an animated video company in New York.

But PTO isn't a panacea for time off issues. It may not stop those workers who habitually call out on Mondays or after long holiday weekends. And some staffers may decide to work when they're sick rather than use days they want to set aside for a vacation.

Employers need to deal with such situations from a performance perspective, says Kate Zabriskie, CEO of Business Training Works, an employee development consultancy based in Port Tobacco, Maryland. That means talking to workers if they come in sick and letting them know they're probably better off at home.

"If they're not performing well because they're ill, I'd say, 'You've got to be here and ready to do the job,'" Zabriskie says.

Van Vlymen suggests starting a conversation with the staffer who tends to call out after weekends, noting there's a pattern and letting them know that if they have a problem of some kind, help is available.

Another issue can be if an employee runs out of time. It can happen if they take vacation time, some personal days for school events or to be home with sick children, and then come down with the flu at the end of the year.

When a staffer is running out of days, especially if it's a highly valued employee, it can be tempting for the boss to say, "Don't worry, we'll pay you for the days you missed." But unless other employees also get extra days, the boss' leniency can be seen as unequal treatment, something that can become evidence in a discrimination lawsuit.

"You need to remain consistent. You can't look the other way for one person," says Eric Cormier, a consultant with the Houston-based human resources provider Insperity.

One solution is that if staffers are able to work from home and aren't too sick, they can telecommute to avoid using PTO.

Companies where employees don't have that option can also be creative. At Motev, a Los Angeles-based limousine service, employees accrue PTO as they work. If staffers use up their time and need more days, owner Robert Gaskill will structure the work schedule so they can accrue more hours. If drivers are sick and come to work, the law prohibits them from driving, so Gaskill assigns them to work in the office.

Some companies award top performers PTO as a kind of bonus. Under a bonus system, companies are allowed to reward staffers with different amounts of money or time off depending on how well they have performed.

"We'll consider either advancing PTO (from the next year) or granting additional days the way we also have employee spot bonuses for doing an awesome job," says Grace Carr Lee, executive director of Hoge Fenton, a law firm based in San Jose, California.

Conversely, underperformers may just have to lose pay. Ben Friedman has had employees who didn't seem to care about their work and who used up their PTO.

"If they use all their time, we wouldn't pay them for the day" they miss, says Friedman, co-founder of All Set, a Boston-based online service that helps homeowners find cleaning and lawn services.

Owners can create other types of leave, Van Vlymen says. For example, giving employees paid leave for personal matters. Or allowing staffers to work flexible hours so they can take care of errands or appointments and still get their work done.

"There are a lot of ways to do it without expanding the PTO you give," she says.

At some companies, especially those where staffers are not on set schedules, the solution is unlimited PTO; staffers can take as many days off as they need for whatever reason.

"Employees are much more comfortable if they need to be out with a sick child or need to be at an appointment," says Carol O'Kelley, CEO of Salesfusion, an Atlanta-based marketing software manufacturer that offers unlimited PTO. "That has relieved a lot of unnecessary pressure and burdens on employees and managers."

With unlimited PTO, companies should still have policies that spell out when time off can be taken, how many people can be off at any time and the factors to decide who gets priority when there are multiple requests for the same days. Bosses can declare no-time-off periods for busy seasons, or if there's a project that needs to be finished.

"If we have a major product release, vacation is less likely to be approved," O'Kelley says.