Vacation Time or PTO: What’s the Difference?

One of the most common benefits that household employers offer their nanny or other employee is paid time off. This can be in the form of sick time, vacation time or PTO (Paid Time Off). Sick time is to be used in case the employee is ill or must care for an ill loved one, and vacation time is for the employee to simply take time away from work. But what is the difference between sick or vacation time and PTO?

Vacation policies are intended to be used for the specific purpose of vacation or leisure time, and employers who offer vacation time generally offer sick leave as well. The alternative to having two separate benefits is a singular PTO benefit, which may be used for any purpose the employee chooses.

Some states consider vacation and PTO (but not sick leave) to be accrued wages. Consequently, those states require payout of unused vacation and PTO at termination and have rules limiting use-it-or-lose-it policies. For example, an employee who resigns with three sick days and three vacation days would only have to be paid for the three vacation days. If the same employee resigned with six days of PTO remaining, they would need to be paid for all six.

If you are in a state, county, or city that requires employers to offer paid sick leave, such as Chicago, New York City, or Los Angeles, and you decide to offer a PTO plan instead, it is critical that you ensure the plan meets all the requirements of the mandatory sick leave law or ordinance. These requirements usually include letting employees use their time in small increments (e.g. one or two hours), ensuring that they accrue PTO fast enough, and allowing carryover into a new year. If you’re in one of these areas, you’ll definitely want to take a close look at the law or ordinance to ensure your PTO program is compliant.

Regardless of which benefits you choose to offer, you’ll want to make sure they are clearly articulated in writing and that your employee(s) are made aware of what is available and how the policy or policies operate.

To learn more about how GTM helps families with all household employment issues, contact us at (800) 929-9213.