California PTO vs Sick Leave

Did you know that the US is one of the very few countries in the world that does not have a statutory minimum for paid time off? That’s right, in the developed world the US is the only country not required to give its employees any time off. Even China has a minimum of five days.

Time off from work is an essential aspect of work-life balance, and employees’ rights to paid time off have become a critical issue in recent years. California is among the states that has attempted to change the status quo and has implemented laws that provide paid time off (PTO) for employees. 

However, the PTO relates to sick leave only and it is very minimal. 

As an employer you have the power to change things and make your employees work/life better and healthier all-round. Here’s how.

Overview of California Paid Time Off (PTO) Laws

What is paid time off, exactly?

Paid time off (PTO) refers to a type of leave that allows employees to take time off from work for various reasons, including vacation, personal time, and sick leave and still get paid while doing so. 

Under California law, employers are required to provide sick leave PTO to their employees based on the number of hours worked. 

As of January 1, 2024 this earned time off must total at least 40 hours or five days off each year but employers can increase it if they wish.

Here are some essential aspects of this law that you should know.

What Are the Eligibility Criteria for California PTO

California PTO laws apply to all employers, regardless of the company’s size, and cover all employees, whether full-time or part-time. 

Before an employee can qualify for this PTO, certain eligibility criteria must be met:

  • The employee must have worked for the same employer for at least 30 days within a year 
  • The place of work must be located within California
  • The employee must also have completed a 90-day employment period before taking any paid sick leave

This PTO can only be used for the certain scenarios:

  • To recover from physical/mental illness or injury
  • To seek medical diagnosis, treatment, or preventative care
  • To care for a family member who is ill or needs medical diagnosis, treatment, or preventative care

Accrual, Use, and Limitations of PTO in California

Employers gain at least one hour of paid sick leave for every 30 hours worked. The amount of paid sick leave an employee can accrue is not capped, but employers may limit the amount of paid sick leave that employees can carry over from one year to another. 

Additionally, employers may require employees to give advance notice before taking paid sick leave and can set limits on the number of employees who can take paid sick leave at the same time.

Essentially, employees can begin accruing that paid sick leave on the first day of employment but can only start using it once they have worked for an employer for at least 90 days. 

Many employers like to simplify this process by providing three full days of paid sick leave at the start of each year.

How Employers Must Track and Record PTO Accruals

All employers must keep accurate records of PTO accruals and make those records available to employees upon request. 

The records must include the amount of PTO accrued and used by each employee and the current balance of unused PTO. You must be aware that employers who fail to maintain accurate records of PTO accruals may be subject to penalties and/or fines.

How Are Jobs Protected Under California PTO Laws?

Under California law, employees have the right to take their paid sick leave for any of the reasons stated above, and employers cannot retaliate against employees for using their sick leave. The same goes for any other type of PTO time off.

Additionally, employers must reinstate employees who take their leave to the same or equivalent position when they return to work.

How To Make a Claim for Unpaid or Underpaid Leave in CA

Employees who believe that their employers have violated California PTO laws can file a complaint with the California Division of Labor Standards Enforcement (DLSE). The DLSE will investigate the complaint and may order the employer to pay time off and pay any unpaid wages, penalties, and interest.

Understanding the Differences Between PTO and Sick Leave

Although PTO and sick leave are both types of paid time off, there are some significant differences between them. Understanding these differences is crucial especially when considering what you will offer your employees.

Conditions for Taking Each Type of Leave

PTO can be used for any reason, including vacation, personal time, and sick leave. When taking this type of leave, the employee is not required to state the reason why they are taking it, nor do they have to provide any proof.

On the other hand, sick leave is specifically for illness-related reasons. And, employers can require employees to provide a doctor’s note or other documentation to prove that they are using sick leave for qualifying reasons.

 

How To Calculate the Value of Each Type of Leave

The value of PTO is typically calculated based on an employee’s hourly rate of pay. In contrast, the value of sick leave is calculated based on an employee’s salary or hourly rate of pay.

Impact of Taking One or Both Types of Leave on Employees

Employees who take PTO have far more flexibility in choosing when and how to take time off, while employees who take sick leave may feel more restricted by the requirement to provide documentation for illness-related reasons. 

Additionally, taking PTO may have a more positive impact on an employee’s mental health and health in general. Allowing time for oneself, vacations, or important events has an enormously positive effect on well-being and avoids burnout. 

What Is the Impact on Employers?

From an employer’s perspective, providing PTO can be more flexible and may reduce the administrative burden of tracking different types of leave. However, employers may be concerned about the financial implications of providing PTO, as employees may use it more frequently than sick leave.

But, providing PTO can have a big positive impact on productivity. You will attract better talent, retain existing staff, and ensure your employees don’t suffer from burnout or mental health problems.

Financial Implications of Using Each Type of Leave

Any type of leave costs the business money. Whether it’s sick leave or PTO, the financial implications are the same.

But ask yourself this. 

Is it better to keep PTO to the bare minimum and risk a tired, unhealthy, unproductive workforce? Or is it better to spend a bit more on providing PTO and have a happier and motivated workforce?

What Are the Benefits of PTO Over Traditional Sick Leave?

Providing paid time of course has a number of benefits when compared with providing solely sick leave.

Flexibility in Taking Time Off for Personal Reasons

PTO allows employees to take time off for personal reasons, such as attending a child’s school event or taking a mental health day. 

This flexibility allows employees to maintain a much better work-life balance and will go a long way toward improving employee morale and job satisfaction.

Encouraging Preventive Care

Because PTO can be used for any reason, employees may be more likely to take time off for preventive care, such as getting a flu shot or seeing a chiropractor or therapist. This goes a long way toward reducing employee absenteeism and improving overall employee health and well-being.

Additionally, if your employees are generally healthier, they’re not going to come into work sick and risk spreading illness around the workforce – something that generally results in more absenteeism.

Aiding in Mental Health by Enabling Employees to Take Time Off for Self

PTO can also be beneficial for mental health. Taking time off for self-care and personal reasons reduces stress and burnout and improves overall employee well-being.

Think about it, if an employee is prevented from attending important family engagements or events because they are forced to work, imagine the toll this takes on their mental health and overall productivity?

Which do you think is easier to manage? A happy, fulfilled workforce? Or a burnt out, tired workforce that holds a grudge against you?

How To Evaluate if Your Company Should Switch to a PTO System

If you’re considering switching to a PTO system, here are some tips for evaluating whether it’s the right choice for your company:

  • Assess your current sick leave policies and determine whether they are meeting the needs of your employees
  • Assess the overall wellbeing, morale, and productivity of your workforce. Could it be a lot higher?
  • Review the financial implications of switching to a PTO system, including the cost of administering the program and the potential impact of employee absenteeism
  • Weigh up the cost against the benefits of providing PTO, including increased employee morale and well-being and the potential for reduced employee absenteeism

Tips for Employers Looking to Transition to a PTO System

If you are considering the transition, look at the data. 

  • Are you struggling with a high staff turnover? 
  • Do you fail to attract top talent to your business?
  • What is the overall mood and morale of your workforce?
  • Do you have high levels of ill health and sickness among your workers?
  • Are your competitors offering PTO?
  • Has productivity been suffering despite staff working long hours and overtime?

The answers to these questions will easily tell you if you should make the switch.

How To Structure a PTO Policy and Ensure Compliance with Labor Laws

If you decide to switch to a PTO system, here’s how to ensure you are in compliance with Californian labor laws:

  • Create a clear and concise PTO policy that outlines precisely how PTO is accrued, how it can be used, and any limitations on its use
  • Train all managers and HR staff on how to administer the PTO policy and how to track and record PTO accruals
  • Ensure that your PTO policy complies with California labor laws, including the requirement to provide PTO to eligible employees 
  • Ensure you maintain accurate records of PTO accruals across the business

Examples of Companies Using PTO as a Way To Boost Employees’ Morale

Many companies have realized the benefit of providing PTO and have successfully implemented PTO policies to boost employee morale and well-being. 

For example, Netflix offers its employees unlimited PTO, allowing them to take time off as needed for any reason. Similarly, Salesforce offers its employees up to 20 days of PTO per year, which can also be used for any reason.

Both are still highly profitable and successful companies despite offering these generous PTO policies. And both companies rate very highly for staff retention and wellbeing.

Resources for Employers Looking To Start Offering PTO vs. Sick Leave

There are several resources available to help you navigate PTO system:

  • The California Labor & Workforce Development Agency provides guidance on the state’s sick leave and PTO laws
  • The Society for Human Resource Management (SHRM) offers resources and best practices for implementing a PTO policy.

Alternatives for PTO and Sick Leave in California

While PTO and sick leave are the most common types of leave provided by California employers, there are several other types of leave that employers can offer, including:

  • Family and Medical Leave: Employers with 50 or more employees must provide eligible employees with up to 12 weeks of unpaid leave per year for certain family or medical reasons.
  • Jury Duty Leave: Employers must allow employees to take time off to serve on a jury.
  • Bereavement Leave: Employers may offer bereavement leave for employees who experience the loss of a family member.

Conclusion

Understanding the earned time off meaning and the benefits it can bring is important for the success of any business. And if all other countries recognize the importance of PTO, then why shouldn’t the US follow suit?

It is important to remember that labor and employment laws change frequently.  Working with experts who are aware of the latest changes can help ensure that your rights and obligations are properly taken care of. 

To understand more about establishing a PTO or employee benefits system within your business contact Finvisor today. Our qualified individuals can help you navigate the process and ensure you’re keeping up with what your competitors offer.

Get in touch today to find out more.

To learn more about what we do, or to request a quote, contact us at hello@finvisor.com or 415-416-6682. We’re here to help you navigate deferred revenue journal entries so you can make the most of your assets!

*This blog does not constitute solicitation or provision of legal advice and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction.*

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