Traditionally in construction, employers offer separate paid time off benefits to employees which including paid vacation, sick leave and personal days. However, in the past decade, many employers in our industry have moved to a Paid Time Off or “PTO” benefit that incorporates vacation, personal and sick time into one all-inclusive PTO plan.
The decision to move to a PTO policy in construction typically is decided on several factors. It is usually ruled against by an executive that feels they may lose money or control with this plan versus a separate vacation, sick, and personal plan. The irony is either plan only works if correctly implemented and administered. Neither program works, in the long run, to maintain employees if they feel they are under the microscope if they take a day off. Characteristically in construction, many of us need to learn the long-term benefits of a day off here and there. Those employees you have to question as to whether they are indeed sick or not, probably aren’t.
For too many years to count any construction company with hourly paid, characteristically self-performing workers would make all employees wait a full year before earning any paid vacation. Sick and personal days were unpaid or sometimes a kind gesture to keep the employee or worker from leaving and going elsewhere. Choices based on supply and demand make those gestures obsolete as the top employers are providing vacation and sick time to all workers and employees as they recognize the cost of turnover and how challenging the best employees are to find.
Often when discussing the advantages of moving to a PTO policy, we listen to stories about how someone worked for a company for a few months. Took a vacation they got paid for and then resigned shortly after that. My question back to them is “Was it an accrual system?” Typically, I get, “What do you mean?”
The right PTO programs are accrual-based. Most of these accrual programs start after the 90-day standard probationary period. PTO is calculated on a 40- hour workweek despite whether the employee works additional hours paid or unpaid in a week. You can try this online PTO calculator. To calculate how the time accrues take the number of days you are giving. Example 10 days per calendar or 80 hours a year they can use upon accrual. You will likely have employees earning PTO at different rates, often with more senior employees earning more hours, or more days, per year than new hires. For example, a new employee with less than a year of service might be granted 80 hours of PTO per year, while an employee with five years of service might have an additional week or more.
If you pay employees every two weeks, you will divide the number of PTO hours earned per year by 26. If you pay your employees weekly, divide by 52 instead; companies that pay twice monthly divide by 24 pay periods. If the employee earns 80 hours of PTO per year and gets paid every two weeks, he will receive 3.08 hours of PTO each pay period. He will receive 3.33 hours of PTO if the company pays employees twice monthly, and 1.54 hours each pay period if the company has weekly payroll.
An example of a PTO policy in an offer letter and/or employee handbook might read like:
Paid Time Off:
The PTO policy will start after 90 days of employment. You will then receive 80 hours paid time off annually accrued and used at your discretion with prior written approval. PTO is used or forfeited annually. PTO must be taken in minimum half day increments. More than 40 hours of PTO can’t be used in the same thirty -day span without prior approval by President of the company. Approved time off beyond what is earned will be unpaid.
PTO based on Years of Service:
- 1-5: 80 hours of PTO time per year, earned at a rate of 1.54 hours for each full work week in a calendar year.
- 5+: 120 hours of PTO time per year, earned at a rate of 2.31 hours for each full work week in a calendar year.
If you notice the employee has to earn their time off. They can’t take more time off then they have earned with pay. They also have to be cognizant of how much time they take off consecutively which protects you and your project.
A week in business goes by fast. Most employees perform better with a PTO policy in place as they perceive it as empowerment for their lives. It helps them to be able to participate with their family or take a day to get physical or intellectual healing without feelings of guilt.
PTO time should be calculated as a cost of doing business, not a loss in doing business. If you are staffed accordingly, the others within your organization are more than willing to help cover for their teammate so the teammate can recharge, get well or celebrate life with their family. The best employees know better than to take a day off during crunch time. As a leader, you should want this for them also. If someone takes advantage of the time off or others then that is a whole other issue that needs addressing unrelated to the PTO policy itself.
PTO is separate from Paid Holiday Time. You need to decide what works for your company for holiday time. The following has become relatively standard in construction as typically unproductive days.
The Company has eight (8) standard paid holidays, which consist of ½ day New Year’s Eve, New Years’ Day, Memorial Day, 4th of July, Labor Day, Thanksgiving, Thanksgiving Friday, 1/2-day Christmas Eve and Christmas Day.
We are always here to help you with putting the right PTO program in place that works for your business model and helps you attract, hire and keep the best employees. Do you recognize its importance?