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PTO Plan Design and Maintenance

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PTO Plan Design and Maintenance

Creating and maintaining a successful PTO program

Paid Time Off (PTO) is one of the most valuable benefits employees consider when choosing their employer. Any employer wanting to attract and retain good employees should have a well defined PTO program.

While offering PTO may seem like simple task, it can be quite complicated. Employers and managers should put a lot of thought into their PTO program.

This guide will help you understand how to leverage a very powerful PTO tracking engine within AdvanStaff’s HR Cloud so you can accurately track PTO hours, save time, elevate employee morale, and get back to work. As with all AdvanStaff programs, we are here to support you along the way.

An effective PTO program is:

  • easy to understand
  • easy to communicate
  • easy to administer
  • easy to automate
Selecting a PTO Accrual – Calculation Workbook
PTO Implementation Form

Knowing the terms below will help you understand what info is needed when building a PTO program with AdvanStaff HR:

What is a Paid Leave Benefit?

A Paid Leave Benefit is any paid leave that the employee receives as a benefit provided by the employer.  How much paid time off an employee receives is determined by each employers’ paid leave policy and is tracked in the Prism database in an hour(s) format.

What is PTO?

PTO is a generic acronym and stands for personal/paid time off.  PTO is a benefit that replaces the traditional forms of paid leave such as Vacation and Sick into one combined benefit. 

What is Vacation?

Vacation is paid leave for time spent away from work by an employee.  Vacation is traditionally used for personal time off such as family activities, extra holiday time, or a short term leave of absence. 

What is Sick Leave?

Sick is paid leave for time spent away from work by an employee.  Sick leave is traditionally used for absences due to illness, medical appointments or a short term leave of absence due to medical conditions.

What is a Benefit Accrual?

An accrual-based PTO policy is one where an employee earns/receives time off each pay period based upon the annual amount offered by the employer. This can be determined with an accrual based on hours worked or a flat amount each period. This is the most common policy type.

What is a Flat Amount, Front-loaded or Lump-Sum Benefit Allocation?

A Flat Amount, Front-Loaded or Lump-Sum-based PTO policy is one where an employee receives a designated amount of time off, all at once. This could mean upon hire, or annually at anniversary. The employer can still opt to instill a waiting period (i.e. 90-day probationary period) before employees can access time off. While less common, this is still a useful policy-type in certain industries.

Preferred Option: One combined benefit plan

  • PTO: Paid Time Off (Personal Time Off)
    • A benefit that places both vacation and sick time into one plan
    • Balances are reduced when using a defined PTO pay code

PTO is the preferred method tracking method for tracking time off

  • It requires less maintenance for the Client to administer
    • only tracking one balance instead of two
  • Flexibility. Employees can utilize their leave as needed
  • It requires less maintenance to administer and greatly reduces the need for audit
    • the Worksite Manager enters hours taken by using the defined PTO pay code
    • Simple processes lead to less errors and minimizes the need for audits and balance adjustments. *Depending on the complexity of the audit, audit time may require a billable service to the client. The goal is to eliminate billable services in as many cases as possible

Other Options: separate benefit plans for VACATION & SICK

  • VACATION
    • Paid leave for time spent away from work by an employee. 
    • Traditionally used for family activities, extra holiday time, or a short term leave of absence.
    • Balances are reduced when using a defined vacation pay code
  • SICK
    • Paid leave for time spent away from work by an employee. 
    • Traditionally used for absences due to illness, medical appointments or a short term leave of absence due to medical conditions.
    • Balances are reduced when using a defined sick pay code

TermDefinition
PTO Benefit PlanThis determines how much paid time off each employee is offered by the company.
Benefit Plan YearA calendar year or an anniversary year that defines the period of time an employee has to earn or use time off benefits. Must equate to 365 days
PTO RegisterA place where the system keeps track of all paid time off entries an employee has. It will show:

How many carryover hours has been calculated from one benefit year to the next
How many hours an employee has earned for the current benefit year
How many hours an employee has taken for the current benefit year
The employee’s available balance
Any manual adjustments that were posted
Calculation Methods The basis which defines how the system will give the employee time off hours.
Calculation Basis:
Flat Amount 		The system will give the employee a flat amount of hour either on a per pay period basis, on a monthly basis or as a lump sum (aka front loaded) of hours upon the employee’s anniversary.
Calculation Basis: Hours Worked/Paid The system will apply a rate to specific pay codes (i.e. regular hours, holiday hours, paid time off hours) which will calculate how many hours and employee earns per pay period. With this calculation basis, the system requires this to be calculated every pay period.
Seniority LevelA seniority level is when an employee will receive an increase in benefit hours as a reward for length of service with an employer. 
Absence CodesA defined pay code that is used to enter hours on the timesheet and reduces an employee’s available balance on the PTO register
Annual Maximum Accrual LimitOnce the annual maximum is reached, the employee will no longer earn time off
Carry Over
Maximum Carry Over BalanceThe maximum amount of PTO an employee can carryover from one benefit year to the next.

This features can encourage employees to use PTO throughout the year.
Available Balance MaximumThe available balance maximum an employee can have before they stop earning time off.
The employee must use time off in order to begin earning hours again

Carryover Hours – Carryover hours are the number of unused hours that may be carried over from one benefit year to the next. The carryover hours are calculated based upon how the company and the system will treat unused paid time off hours. This will be tied directly to benefit year.

YTD Hours Earned – The amount of hours earned during the employee’s current benefit year.

Balance Hours – Balance hours are the result of adding carryover and current year accrued hours and then subtracting out any taken (paid) hours. 

Negative Balance Hours – Negative balance hours are the result of an employee taking more hours than they have available. The worksite manager will be responsible for monitoring any employee in a negative balance situation when approving or denying employee time off requests

“Carry-Over” Policy – A carryover policy is a paid leave policy that allows for unused benefit hours to be carried over from one 12 month period to the next. If the employee will accrue hours, the carryover policy must allow for unused hours to be carried over from one benefit year to the next. Unused carryover hours can be limited to a specific number of hours in a few different ways. This should be discussed with the AdvanStaff HRIS team.

“Use It-or-Lose It” Policy – No carry-over. A “use it-or-lose it” policy is a paid leave policy that does not allow for carryover of unused hours from one 12 month period to the next. This policy can only be used with Flat Amount, Front-loaded or Lump-Sum Benefit plans.

Calendar Year – will begin on January 1st and end on December 31st.
When the pay period includes 01/01, the employee’s register will reset. A payroll must be finalized in order for a reset to occur.

Employee Anniversary – will begin on employee’s date of hire until one day prior across two different years
For example, if Mary was hired on 06/05/2021, her benefit year would end on 06/04/2022
When the pay period includes 06/05, the employee’s register will reset. A payroll must be finalized in order for a reset to occur.

Reset – When the benefit year ends, the employee will reset. During the reset, a sequence of events will occur on the employee level. These events will vary depending on the carryover policy.

If the client’s policy allows carryover hours, the system will do the following:

  1. Move the accrued hours to the carryover hours bucket
  2. Clear out the taken hours
  3. Update the balance hours
  4. Start accruing hours for the next benefit year

If no carryover is allowed, the system will do the following:

  1. Zero out the accrued hours
  2. Zero out the taken hours
  3. Zero out the balance hours
  4. Employee receives their lump-sum of hours for the next anniversary year

Building Your PTO Plan

Is it better to start with a new plan(s), or to adapt an existing plan(s) to meet requirements? To build out your PTO, you will need to outline the basic classes, benefit features, and auto-enrollment rules you want for each plan.

Steps for PTO plan approval:

  • Select from an AdvanStaff Benchmark plan or migrate to an automatable plan design!
  • Review of proposed plan by Human Resource Information System team. Determine if automation can be achieved (our HRIS team thinks like computers do!)
  • Review goals of the plan, ensure the proposed plan accomplishes them
  • Review auto-enrollment rules
  • Prepare the plan’s calculation language/table by HRIS team
  • Client sign-off on plan calculation; HRIS provides calculation(s) to Human Resource Representative
  • Employee enrollment via AdvanStaff HR template spreadsheet; Any existing balances must be provided by Client
  • Prepare the plan’s policy utilization language by HR Representative for your employee handbook’s policy
  • Client sign-off on plan’s handbook policy

Once a plan can pass all of the above steps, it is ready to go!

Getting started on the right track is the first, and perhaps most important step, when building a successful PTO program. Is it better to start with a new plan(s), or to adapt an existing plan(s) to meet requirements? Is your plan:

  • simple
  • logical
  • easy to understand
  • easy to automate

This is the only recipe for success.

It would be convenient to assume that the PTO platform can accommodate any design imaginable. However, that would be neither accurate nor wise. While the AdvanStaff platform is flexible, keeping plan designs reasonable, easy to understand and manage, will minimize audits, manual adjustments, save time and provide the confidence in your plan, that managers and employees deserve!

These principles of design are the basis for AdvanStaff HR’s Benchmark PTO Plans – We offer a suite of plans that are pre-configured to to fit the the necessary requirements. Just select from our list of plans and you are good to go!

If you have an existing plan, our pros can help you migrate to a plan design that fits the criteria and communicate the updates to your employees!

If your plan is more complex and you want to keep it intact, we can provide you with credentials to access the PTO module and administer your existing plan.

Before going live with PTO plan, we need to ensure it can be successful on ALL levels; thus review and approval from the various teams at AdvanStaff HR is necessary.

First you will need to decide the type(s) of plans are required to accomplish your goals.

Questions to answer:

Q. Do you want one PTO plan to cover all leave, which is most common in today’s workplace. Or do you need separate vacation and sick time?

Q. Can one plan cover all employees or will I need separate plans for:

  • State mandated PTO plans
  • Part-time or Full-time employees

Most plans can have separate accrual levels based on seniority.

Each Benchmark Plan was designed after years of best-practice development. Think of it as a head-start to get you on your way to defining a successful PTO program. Once basic configuration options are selected, the accrual tables can be added, an example of these are accrual rates and seniority bands. We even write the handbook language for them!

Basic Benchmark Plan designs

  • Per Pay Period Accrual (Hours Worked) on a Calendar Year
  • Per Pay Period Accrual (Flat Amount) on a Calendar Year
  • Flat Amount, Front-loaded or Lump-Sum Benefit on an Anniversary Year

Client Choice Settings

  • Select accrual method
    • per hour worked, per pay period, per month, or annual lump sum
  • Maximum carry-over balance
  • Max accrual limit
  • Display balance on the employees pay voucher?
  • Display balances in the employee self-service portal?
  • Base seniority dates on the employees original hire date, or last re-hire date?

Choose from the following accrual methods

Considerations:

Fluctuating employee work hours?

  • Because hourly employees almost certainly have fluctuating hours, they will not get their maximum annual PTO own if they are paid less that 2080 in the year.

Keeps payroll liability for PTO to a minimum.

  • While some employee may not reach their maximum, the ones that work overtime will be capped at the maximum annual accrual amount.

Reconciliation and administration?

  • Because the plan design creates variable accrual balances by employee, it is more difficult to audit and reconcile. Auditing and adjustments may require assistance from they AdvanStaff HR technical team, although the Report Center pre-built reports can be very helpful.

Perfect for companies who maybe subject to mandated leave

  • An example is NV mandatory paid time off.

What is included in hours paid and why:

Pay codes included in HOURS PAID are:

  • Hours worked
  • PTO paid
  • Holiday paid

Many employers struggle with the concept that PTO hours accrue on PTO and paid vacation time taken.

However, once you really think about the logic and intention of this type of plan, then it makes perfect sense. The design is to award the employee XX amount of PTO hours per year based on 2080 hours PAID, not hours worked. Full time employees are given paid holiday hours and they will use PTO hours throughout the year. Their total hours worked + paid holidays + PTO = 2080 hours per year.

2080 annual paid hours are expected, thus the employee should accrue PTO on all hours paid so the target PTO award benefit can be achieved.

A policy based on HOURS PAID per pay period means an employer assumes a full-time employee works (or is paid) 2080 hours per year (40 hours x 52 weeks = 2080 hours). The employer then determines the target number of PTO days to offer per year, which will in turn determine the PTO accrual rate per hour paid.

Example of a client’s plan:

Years
of Service		PTO days
(hours) per year		FormulaAccrual rate per hour paid
0-27 days
(56 hours)		56 PTO hours
— divided by —
2080 hours paid		.0270 PTO hours earned per hour paid
3-514 days
(112 hours)		112 PTO hours
— divided by —
2080 hours paid		.0539 PTO hours earned per hour paid
6+21 days
(168 hours)		168 PTO hours
— divided by —
2080 hours paid		 .0807 PTO hours earned per hour paid

In the example above, an employee in their first two years of employment is expected to earn roughly 1.08 PTO hours per week of employment. (40 hours x .0270 = 1.08)

In the example above, an employee in their first 3rd to 5th years of employment is expected to earn roughly 2.516 PTO hours per week of employment. (40 hours x .0270 = 2.516)

In the example above, an employee in their first two years of employment is expected to earn roughly 3.228 PTO hours per week of employment. (40 hours x .0270 = 3.228)

These amounts would be added to the employees PTO register (bucket) when payroll is posted each week.

The employer may prefer PTO on a flat per amount basis. These types of plans award PTO based on any of the following events:

  • flat amount per pay period
  • flat amount per year (at hiring anniversary)

Considerations:

Good for consistent work hours (i.e. always 40 hours with minimal overtime)

  • Flat accrual is a basic design plan. It generally works better for stable employees with high trust and low turnover.

Easy to reconcile and administer

  • Because accrual amounts are flat, the registers are easy to audit and easy to administer.

Once the number of plans required and the accrual methods are known, the next step is to define the the auto enrollment rules so the program can run on auto-pilot.

The system can auto-enroll based on any number or combination of factors:

  • Create a benefit group (recommended)
    • Define a group and assign members to the group upon hire
    • Can have auto enrollment based on top-level factors
  • Custom build a program based on one or many of the following (has limitations):
    • Employee Type (FT or PT)
    • Pay Method (hourly vs salary)
    • Position Class (executive, management, employee)
    • Location (different by state, worksite location, etc)
    • Home Division
    • PTO, Vacation or Sick Sick time?

Ways to automate enrollment

Auto-enrollment processes should be discussed with AdvanStaff HR’s PTO specialist.

Plan configuration and administration; AdvanStaff HR or in-house?

Will the PTO program put in place be administered by AdvanStaff HR / HRIS or will the client self administer the program? You can choose!

In order to maintain efficiencies and data consistency, AdvanStaff recommends clients follow AdvanStaff HR guided programs. We’ve been operating PTO plans for over 30 years for thousands of plans each year, we know what makes a plan successful (and what makes a plan fail.) AdvanStaff HR will collaborate with you to build a successful program.

The table below outlines whether or not a program is administered by AdvanStaff HR or by the client.

Advanstaff HR Administered Plans

  • Must follow suggested design rules (see Benchmark plans.)
  • Must pass approval from HRIS and HR for:
    • compliance,
    • logic & system compatibility,
    • consistency,
  • May include plan maintenance & support (audits, adjustments, etc) if issues are system related.
  • Most recommended option!

Client Self-Administered Plans

  • Open plan structure design, more flexibility. You can do whatever you want.
  • HRIS approval not required, however client might be required to track PTO outside of the HRIS platform if the plan design is outside the scope of logic or capabilities of of the HRIS.
  • Clients are required to adjust PTO database records manually through the manager/admin portal.
  • PTO audits and adjustments requiring AdvanStaff HRIS staff are often time consuming and complex and require an hourly billable service to correct.
PTO
View Only		PTO
Approver		PTO
(General)		PTO
Admin
Administration
Can design and administer plansView OnlyY
PTO Setup
PTO Classes View OnlyY
PTO Benefit PlansView OnlyY
PTO Register Types View OnlyY
PTO Absence CodesView OnlyY
PTO Auto Enroll RulesView OnlyY
PTO Leave Request Management Access (via Work Center)
Leave Request ManagementYYY
PTO Adjustments and MaintenanceView OnlyYY
PTO Plan Setup and EnrollmentLimitedY
PTO ReportingLimited Reports AvailableYY
All Employee Related Functionality
Mass import new initial entries and adjustmentsYY
Employee level enrollment (one by one initial entry)YY
View / Edit PTO Auto Register Enrollment
– can initiate mass enrollment according to auto enroll rules		YY
View / Edit Employee PTO Register
– can make adjustment entries and delete registers		View OnlyYYY
Employee PTO Register Inquiry View OnlyYYY
Employee Voucher PTO Visibility Control
– can control visibility of employee accrual on the
employee paycheck		YY
Employee AbsenceYY
PTO Reports
Employee PTO Detail Report (considered an HR report)YYY
PTO Hours Taken Report (considered an HR report) YYY
PTO Approval Report (considered an HR report) YYY
Pay Period PTO Report (considered a payroll report) YYY
Employee PTO Summary (considered a payroll report) YY
Employee PTO Accruals Report (considered a payroll report) YY
Eligible PTO Report (considered a payroll report)YYY

Frequently Asked Questions

What types of benefit tracking does AdvanStaff offer?

  1. PTO
  2. Vacation & Sick Leave

Employers must choose one type of plan setup or the other, both benefit types are not recommended.

Providing accurate PTO balances is critical to and employee’s satisfaction with the benefit you offer. A database system can only calculate and process data, as it is presently represented in the system. Worksite Managers will need to ensure the data is “clean”. Some of the most common areas Worksite Managers need to maintain, in a timely manner, to ensure accuracy include:

  • Managing an employees Full Time vs. Part Time status
  • Movement of an employee between the plans they are eligible for i.e. when plan eligibility is based on positions, locations or other factors.
  • Employees who were terminated and rehired – The system default will always automatically re-instate an employee’s PTO benefit as it was when they terminated. If your policy stipulates otherwise, a manual edit is required upon rehire.
  • Proper coding of PTO time on the timesheet. When PTO hours are coded incorrectly, it has a significant impact on balances. i.e. PTO time that is coded as “regular” on the timesheet, will not reduce an employees available balance.

How are accrual rates calculated?

An accrual rate is always referred to in hours.  The rate is calculated based upon the total number of hours offered by the plan, then divided by the frequency of the accrual.

An example of a FLAT RATE per pay period accrual plan is as follows:

A semi-monthly employer would like their employees to accrue every pay period for a total of 40 hours of PTO per year.

To calculate the rate, the formula would be:

  12 (months per year) x 2 (pay periods per month) = 24 pay periods per year

  40 (hours of PTO) ÷ 24 (pay periods) = 1.6667 hours per pay period.

Sometimes an employer may refer to the accruals in days or weeks.  For a full-time employee, one day is equal to 8 hours.  One week is equal to 5 days or 40 hours. 

An example of a FLAT RATE per hour worked plan is as follows:

A bi-weekly employer would like their employees to accrue PTO on every hour PAID for a total of 80 PTO hours per year for a FULL-TIME employee.

To calculate the rate, the formula would be:

  52 (weeks year) x 40 ( hours per week) = 2080 hours pad per year

  80 (hours of PTO) ÷ 2080 (annual hours paid per year) = 0.03845 hours per per hours paid.

This model uses hours PAID. An employee will accrue PTO on paid holidays, or any paid PTO program so the expected hours are equal to 2080 hours per year.

Remember to convert the weeks and days into hours before attempting to calculate the hourly rate.

How are benefit hours accrued?

  • Every pay period.
    • Weekly
    • Bi-Weekly
    • Semi-Monthly
  • Based on hours paid in a pay period
  • A lump sum received on anniversary

REHIRES – What managers need to know about processing their rehires (being rehired in this same client ID).

The system default will always automatically re-instate an employee’s PTO benefit as it was when they terminated. If your policy stipulates otherwise, a manual edit is required upon rehire.

-System will keep existing PTO register intact

-System will resume tracking balances where the employee left off prior to termination

-No changes to seniority date are automatically updated

-Any changes needed to the seniority date will require
     –any existing PTO register to be deleted
     –a new PTO register to be created
     –must be completed by the time the rehire’s first payroll is processed

CROSS HIRES &/Or transfers – What managers need to know about processing their cross hires/transfers (crossing client ID’s by working in more than one client ID).

System will NOT assume any other employee record is related

System will treat the employee as a new hire and will use the new hire date as the seniority date

Any changes needed to the seniority date will require
     any existing PTO register to be deleted
     a new PTO register to be created
     must be completed by the time the rehire’s first payroll is processed

This new PTO register may include any other previous balance from another company as needed based upon the company’s policy

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