The season of summer vacations is upon us, which often surfaces questions about paid time off policies and compliance. When was the last time your organization reviewed its paid time off and time and attendance policies? Conducting an annual review of your paid time off policy will help clarify employee time and attendance expectations and help protect you from potential compliance liability. 

Time and Attendance: A Look at Paid Time Off Compliance

The season of summer vacations is upon us, which often surfaces questions about paid time off policies and compliance. When was the last time your organization reviewed its paid time off and time and attendance policies? Conducting an annual review of your paid time off policy will help clarify employee time and attendance expectations and help protect you from potential compliance liability.

Time Off Compliance Facts

While surprising to many workers, the Fair Labor Standards Act (FLSA) does not require employers to pay employees for time not worked, such as vacations or holidays. Despite this fact, the majority of Americans, three out of four according to Forbes, receive paid vacation time and holidays. The gap between those who do and do not receive paid time off is particularly acute for small business and low-wage workers.

  • 69 percent of small business workers receive paid vacation time, compared to 86 percent of employees of medium and large establishments.
  • 49 percent of low-wage workers have paid vacation, compared to 90 percent of high-wage workers.

“While U.S. law doesn’t require paid time off, employers must ensure that their vacation and sick time policies and procedures stay within the boundaries of labor and employment regulations. Software like Ceridian Dayforce Time & Attendance helps employers feel confident that they are acting fairly and compliantly.”

-- Rob Rose, vice president of product management at Ceridian

Asking the Right Questions

To objectively evaluate your time off policy, it is helpful to answer six basic questions: who, what, where, when, why and how. With help from HR Defense Blog, written by Akerman, LLC, we provide a guide for how your organization can use these questions to compliantly shape your paid time off policy.

Compliance questions

Who – Who gets vacation time?

While organizations are allowed to vary vacation amounts based on employee level and tenure, these rates must be communicated in writing. Outline vacation allotment details in your policy and ensure that employees with similar circumstances are given the same amount of time off.

What – What happens to unused vacation time?

Employers should very clearly outline what will happen to employees’ accrued time at the end of the year. Will unused time be forfeited after a certain date? Will a certain amount roll over to the next year? If time will not carry over to the next year, be sure to specify the date on which any accrued vacation will be forfeited.

Where – Where can employees see the time they’ve accrued and the rate at which it accrues?

It is imperative that employees understand how their vacation time accrues. Does their time off start accumulating immediately upon employment or does it begin after a certain amount of time? Be sure to provide instructions on where employees can go to easily and conveniently check their available vacation time and plan future time off.

When – When can employees use their allotted vacation time?

Does your organization have blackout dates for vacation use or limits on the maximum/minimum amount of time employees can take at once? How do employees request and gain approval for upcoming paid time off? Your time off policy should clearly outline the answers to these questions and provide guidance on the process for requesting time off.

Why – Why does the organization have this specific vacation policy? How was it developed?

While employers aren’t required to provide an explanation of the reasoning behind their time off policy, doing so will help increase employee engagement and acceptance of the provisions. Within your policy, briefly explain the intent behind and benefits of the rules and regulations.

How – How much vacation time do employees receive?

Most employers take one of two approaches to vacation allotment: 1) they give the same amount to all employees; or 2) they award time off based on years of service. Regardless of your company’s approach to paid time off, your policy should clearly outline how much time off each employee will receive each year.

For more information:

  • View our infographic on paid time off policies around the globe
  • Learn about Dayforce Time & Attendance
  • Watch a video about workforce management
  • Read Ceridian's Automated Scheduling and the Degrees of Optimization white paper