This weekend’s news coverage and social media scroll were dominated by reports of the awful things happening in Israel right now. It’s pretty difficult to swallow the images of violence and abuse being perpetrated by Hamas. And no matter how many times you hear about these kinds of things, it never gets easier.
But even with difficult things like this, be mindful of letting your thoughts and feelings be dominated by the coverage. There will always be something to read and take in, but these things have a way of igniting emotions to a breaking point if they’re not regulated.
And, as a business owner, you need to make sure a good portion of your energy is spent on what pertains to your business.
Before I move on, let me also briefly address what you should do if you have an Employee Retention Credit (ERC) claim submitted to the IRS that’s been put on pause. The primary thing you need to keep in mind is that if you get faced with an audit about the claim, the IRS will want concrete evidence and documentation to support your eligibility. So make sure you have that in order. It’s your best defense against over-zealous investigators.
So, on to what I want to discuss today. I wrote recently about some of the other paid time off policy options out there for businesses to offer besides the “use it or lose it” approach. A fellow Boca Raton business owner responded to share how she was kicking herself for not having more clearly defined PTO payout rules in place in her own office.
She had apparently found herself in a financial pinch when two of her staff resigned and opted to take their unused vacation days as paid time after their last day in the office. Because she had no PTO payout rules in place to govern when employees could take that benefit (her state doesn’t require payment of accrued vacation time upon separation), she opted to pay those staff members for their unused days to avoid potential legal confrontation over her vague vacation policy wording.
That’s a place none of us want to be in, especially because it’s entirely avoidable. So with that in mind, and as we’re rapidly approaching EOY, I’d like to show you some policies to make sure you have included in your official vacation benefit package.
A PTO Payout Policy Checklist for Boca Raton Business Owners
“The biggest lesson I’ve learned by living a little is you should always put things in writing.” ― Richard Branson
Because PTO payout rules vary from state to state, you’ll want to start by verifying the local laws you’ll need to abide by first. You can find those PTO payout laws by state here.
Whether your employees get paid for their unused vacation days when they say their goodbyes depends on two things: your company’s policy and your state’s laws. Some states have specific rules about this, while others leave it up to the employer.
In most cases, it’s the company’s call. You decide whether or not to dish out some extra cash for those unclaimed PTO days when an employee leaves. But here’s my main point today – you need a well-defined PTO payout policy in place to guide this process.
I should point out that there’s technically no federal law that forces businesses to offer PTO to their workers. It’s not a requirement. But, let’s be real, offering PTO makes for happier employees and will help you attract better talent.
Now, if you’re thinking about creating or changing up your own PTO payout policy, here are some definitions and provisions to include:
1. How payout is calculated
You (the employers) are responsible for stating how PTO hours are tallied and calculated, while also withholding taxes according to IRS regulations. Vacation pay doesn’t always fall under the category of supplemental wages, but when it’s disbursed as a vacation payout, it becomes subject to a flat 22% supplemental income tax.
2. How to handle sick days
In 14 states and Washington, D.C., employees have the right to get paid when they’re sick. It’s a state thing, not a national one. So, think about whether you want to pay your employees for unused sick days when they leave.
3. Timing of payout
If you’ve got a policy for paying out unused PTO, there’s usually a deadline. Most times, it’s within 30 days after the employee leaves.
4. The reason for separation
In some states, it doesn’t matter if an employee gets the boot, gets laid off, or decides to call it quits – they still get paid for their unused PTO. But that’s not the case everywhere. Some places let you decide if the reason for their departure affects the payout. If your state doesn’t spell it out, make sure your policy does.
Now, this list isn’t comprehensive. There’s more to it, and that’s where an HR pro can lend a hand. They’ll make sure your South Florida company’s policy abides by local regulations while also contributing toward a happier workplace.
To being prepared,
Schaffer Zeigen CPAs
