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Employers Should Plan for End of Year PTO Crunch

    Client Alerts
  • July 17, 2020

With the COVID-19 pandemic continuing across the U.S., many employees have been unwilling or unable to use vacation and paid time off benefits through the first part of the year. This has led some employers to fear a looming “PTO bomb,” meaning that a large number of employees will try to use a large portion of their 2020 leave benefit during the holidays. “Use it or lose it” policies exacerbate this problem, requiring employees with large PTO balances to take time off in a compressed period of time at the end of the year.

State laws generally prohibit employers from simply cancelling employees’ accrued leave requirements. Some employers are instituting PTO cash out options, or allowing employees to roll over some accrued 2020 time to next year. Other employers allow workers to donate accrued PTO to coworkers in need of time off, but these plans can create some unintended tax consequences.

In addition to these voluntary measures, employers are generally able to impose blackout periods where they disallow use of vacation or PTO due to business needs. Employers facing a possible PTO bomb should plan now for covering work needs at the end of the year. Any changes to PTO use policies should be provided in writing to employees in order to minimize disruption to any vacation or holiday plans.