Comments on: PTO: More trouble than it’s worth?

By: Susan

Susan — Tue, 17 Feb 2009 15:43:27 +0000

I did a little research on this issue. To help other people who were as confused as I was about this article, I hope this helps clarify things. This article refers to non-exempt salaried employees who sell back their unused PTO. The buy-back is treated as compensation and must be added to the regular wages which is then divided by the total hours worked to calculate the hourly rate, then the overtime rate. This rule does not apply if the person actually takes time off, only if they sell unused PTO back to the company. It’s not entirely clear but it seems this also does not apply if the company is paying for unused PTO at the time of termination because it is not quite the same thing. This rule does not affect hourly or exempt salaried employees either.

The article would have been much more informative and less confusing if it had simply mentioned this applies to non-exempt salaried employees, or if the previous posts at least had. We don’t have any non-exempt salaried employees so I didn’t think of it as I am sure others did not either.

Considering the buy-back could result in a substantial sum, I would think it would only be reasonable to have pre-approval for the buy-back and to limit the amount that can be sold back. I think that if the company only allowed buy-backs say at the end of the year and didn’t allow any overtime unless it is absolutely unavoidable, this would be the easiest way for employers to lighten the financial burden of having a buy-back program. With the holidays at that time and overtime is still calculated as hours worked, not hours paid, that could be the best time for it.

By: Tom

Tom — Fri, 16 Jan 2009 20:21:58 +0000

I believe the author was indicating that the compensation received for the vacation has to be included in the calculation of the “regular rate”. However, if both hour and earnings on included in the calculation, this should not impact the rate of pay for the overtime (if any) that’s due in that payperiod.

By: Jim

Jim — Fri, 09 Jan 2009 23:28:18 +0000

I agree with Susan. OT is determined based on an employee working over 40 “productive hours”. Vacation or PTO time is not concerned productive time.

By: Helen

Helen — Fri, 09 Jan 2009 22:12:07 +0000

I agree with Susan:we have previously been audited by DOL, and have had no issue with seperating actual time worked from correctly coded sick pay reimbursement for unused paid sick time off. It never makes sense to lump everything as PTO. Additionally, if an employer pays for break/lunch, this would be excluded from overtime considerations as well. In short, and in general, a non-exempt employee must work over 40 hours in a five day week to be paid OT pay; work is the key word.

By: Jennifer

Jennifer — Fri, 09 Jan 2009 19:14:04 +0000

This is in response to Susan’s comment. The article is correct about pay outs affecting overtime rates. If during the week in which the pay out occurs the employee works overtime, the overtime rate will be weighted by the amount of the payout. Overtime rate is based on the total wages for the entire week.

By: Jack

Jack — Fri, 09 Jan 2009 18:17:47 +0000

We avoided state labor laws by ERISA-fying our Paid Time Off plan. Have been successful at overcoming state challenges in New Hampshire, Illinois, Wisconsin and California.

By: Susan

Susan — Fri, 09 Jan 2009 15:13:32 +0000

I agree that monies paid for PTO buy backs must be counted toward total compensation — when calculating workers’ compensation premiums and retirement benefits but I cannot find anywhere in the FLSA regulations where this would affect overtime. Overtime is calculated after the person actually WORKS over 40 hours per week. As far as the OT rate goes, I hope that anyone with half a brain would code for a vacation buy back as either Vacation Pay or Vacation Pay Buyback and not simply add the hours to regular pay wages which is what OT is usually based on. Unless some clarification is provided in the above article, this comment seems way off base.

By: Sarah

Sarah — Thu, 08 Jan 2009 23:53:33 +0000

What is the law in Missouri regarding PTO?

By: Robert P. Bumann

Robert P. Bumann — Thu, 08 Jan 2009 23:50:04 +0000

I have a question,

Our company is a contract security company, we use our mobile drivers as supervisors after regular office hours, as our operation is 24 hours. We give our upper and mid level managers (Normal hours are the same as our office hours) PTO in the form of vacation time, sick time, and personal days.

We are considering giving our mobile drivers, who act as supervisors (after office hours) PTO; If we do this, do we have to offer PTO for all employees, and one more thing. At the end of the year, if the drivers want money for their PTO instead of the time off, can we, as a company limit the group of people (Mobile Drivers, Managers, both exempt or non Exempt) who we would or could buy back the PTO?

Bob Bumann
Operations Manager

By: Bill

Bill — Thu, 08 Jan 2009 23:04:16 +0000

With having manufacturing facilities in both the the states listed in this communication, CA & IL, I feel the pain of administering our PTO policy. Even our corporate headquarters in Michigan is subject to penalities on having to pay out unused PTO upon termination of employment.

I have heard from other HR professionals that organizations are moving to eliminating their formal PTO benefit.

What are your organizations doing that is creative in getting around this issue?