Use It Or Lose It PTO Policy

Ruby Tuesday

As usual when I have a question I turn to the experts.

An employee told me this morning that he heard Wisconsin prohibits a "use it or lose it" accrued vacation/paid time off policy. I searched for information on the forum regarding this issue and found a post from 10/01 that read Wisconsin does not prohibit such a policy.

Does anyone know where I can find legal documentation to support the policy.

Thanks in advance for your help!

LindaS

I would check out the Department of Workforce Development website...[url]www.dwd.state.wi.us[/url] WI does not mandate employers offer vacation time to employees nor does it mandate the payout of vacation if an EE is terminated. "Use it or lose it" policies are legal in WI.

Pork

From an "Employee Relations" point of view the company that maintains an "use it or loose it position" is a company stacking firewood for hot seat in a UNION drive. Always be looking for the means to put out these fuels. We pay all employees for vacation time earned but not used. We pay all employees for their sick time on the first week of December. Those that have not been sick get a real Christmas present. Our computer also averages all hours worked most get a paid 48 hour week as their sick pay out. EXEMPTs do not get this bennie for they have already been paid whether they were there or not. The EXEMPTs are, however, allowed to sell back their vacation days, but we really encourage them to take the days off to unwind and relieve the stress.

LOOK OUT FOR THE LITTLE GUY AND HE'LL BLESS YOUR EFFORTS!

PORK

Parabeagle

I have to disagree. I have worked under both types of systems and on the whole much prefer the use-it-or-lose it system. We are adamant that our employees take the time off they're entitled to and this system forces them to actually TAKE THEIR VACATIONS!! (Novel idea, huh?). Vacation time is not a savings account, it's not a Christmas Club, it's time meant to be taken off and recharge your batteries. Just my thoughts.

ray a

Pork makes a good point with employee relations. Our policy is to reimburse ee's up to 40 hours, combined vacation and personal time, at the end of the year. We give them the additional check in mid January in between pay periods. Anything over 40 hours is lost and no carry over. Exempt ee's do not get reimbursed for personal time, just vacation. The reason for the combination of reimbursement and lose it, is to encourage the use of the time off, as Pork said. Typically, the only people who lose any time are program managers, engineers, supervisors - people who think they are too important to be away for even a day without the company going backrupt.

Hunter1

Ruby: Sorry I can't find a cite for a use it or lose it policy, but there's no question that Wisconsin allows the practice. As far as it being an invitation to unionization, I've got 6 unions, and all of them have use it or lose it provisions in their respective labor agreements, so our non-represented employees have no reason to believe they'd get the benefit if they joined. It's accepted as merely the practice; that's how we administer our vacation benefit. If you do have a policy or practice of paying out accrued or pro-rated vacation, however, I believe the state will enforce its payment on an individual complaint.

LindaS

I have worked in two unionized organizations and BOTH employed the "use it or lose it" policy.

Ruby Tuesday

Thanks everyone for your thoughts and comments! I was able to find something in an employment law manual. I suppose I should have looked there first but I learn so much from all of you.

Down_the_Middle

It took me awhile to realize this, but capping vac/ETO accrual is a far less inflammatory term than "use it or lose it". Many states prohibit the loss of what's been accrued, where capping an accrual is perfectly acceptable. This is a legal as well as philosophical issue, but when you blow away the smoke, I'm in favor of capping the accrual.

Steve McElfresh

Friends,

On the general issue of such policies, let me also suggest a third option. It is little used, but has proven useful in some companies. It started with a client who had one form of use-it-or-lose-it policy, a capped accrual (they did not allow additional accrual until the total hours accrued got below a certain amount). But they did make occasional exceptions for compelling personal reasons, and these exceptions had a way of continuing for a long time. They knew there was risk in that, but were not ready to change the practice. But wanted an alternative.

I suggested and they implemented a "ratchet-down" provision, whereby if an employee had not used the requisite amount of their PTO/vacation time, their future accruals were at a lower rate (e.g., 25 or 50% of that to which they were otherwise entitled). With this in place, the executives found they had more of the backbone necessary able to take a hard line and not allow exceptions. And it appeared to have almost as much value as an incentive for staff to take their vacations.

If one wanted to soften the impact but still deliver the message, the same thought could be applied to a pure use-it-or-lose-it policy -- i.e., rather than lose all, the employee loses 50 or 75%.

Regards,

Steve

Steve McElfresh, PhD
Principal
HR Futures

408 605 1870

NaeNae55

Since I have an accounting background, I am going to chime in here with another prospective. People who work in financial environments (accounts payable, cashier, etc) are expected to take a vacation of a minimum of 1 week (5 consecutive workdays) every year. Auditors look for this when reviewing a firm. The reasoning comes from the idea that someone committing fraud is more easily caught. There are tons of stories out there of the wonderfully dedicated employee who worked for 20 years without taking time off who suddenly had to have surgery and low and behold they found out this dedicated employee was dedicated to lining their pockets.

Stretching this companywide, I have found that honest employees need to have at least 1 week off too. Besides the benefit of recharging batteries, the company will soon discover if the employee is processing their work incorrectly or if more efficiant proceedures need to be implemented. It's a good thing for everyone.

Good luck!

Parabeagle

I agree with you, NaeNae. In fact, we just terminated a "loyal" manager (8-year employee) who showed some rather alarming accounting "irregularities" at her location. She NEVER took time off and always ended up forfeiting days. Fortunately, we did not lose a lot of money.

moneyman

I agree. I think that encouraging people to take their time is good. As mentioned, in many industries it can be more than encouraged, but mandatory. Internal control procedures in many financial institutions will allow people to take of a day here or there for personal/sick reasons, but will make a mandatory 5-day period once a year. This is a great time to see what "pops out of the woodwork". I remember the story of a guy working for the Dodgers (I think). They thought he was a great guy, hard worker, he even came in during his vacation times to process that payroll because is was a "complicated" system, too hard for someone else to do while he was away on vacation. Well, you know where I am going with this one. He was creating employees (I think they said that they employeed over 300 people, so it was easy to do), he was reporting extra wages for some people and splitting the money etc. They found out when he had a heart attack and just couldn't get in to do the payroll.

My thoughts on this are that in addition to a great internal control procedure (the accountant in me) AND it is also a great employee well-being booster (the HR person in me). No matter how much you like your job, or how good you are at it, how easy it may be, etc. everyone still needs time away. That the the foremost reason we made employees take PTO at least once a year in a 5-day continuous period. We did not want to burn out good employees, even if they didn't think that they needed it.

Our company has a use it or lose it policy which caused headaches at first, but as people got used to it, and we explained the reasons for it, it was more acceptable. The only time the we will pay people out is if they terminate during the year, and we only pay if they give us a courtesy minimum 2-week notice (which is spelled out in the handbook).

ray a

The opinions expressed by several posters that encouraging the use of vacation reminds me of a conversation I had many years ago with our then CEO. I was "bragging" how I never took vacation thinking he would be impressed with my dedication. He was a very calm and polite man - a gentleman. He very quietly looked me in the eye and told me I was cheating myself because I needed to get away to recharge my batteries, I was cheating my family because they needed the extra time with me, and I was cheating the company because recharging my batteries and spending time with the family would make me a better employee. I have been using my vacation ever since.