How to Develop and Administer Paid-Leave Programs

Everybody needs time off work, but most won’t if it means getting paid less. This is why paid leave is crucial in employee welfare.

Being able to spend time on interests or leisures breaks people’s routines and improves their mindfulness. Taking a break also reduces stress, improves heart health, improves sleep and boosts learning. Ultimately, being able to leave work without worrying about pay will result in healthier, more productive employees. However, developing and administering a paid-leave program to enable this isn’t as easy as it sounds. A paid-leave program affects the company as much as it affects the employee, so it must be well-designed to ensure that it fulfills both parties’ needs.

Below are the steps you can take to develop and administer a paid-leave program best suited to your company and its employees.

1. Address the why

It’s a given that implementing a paid-leave program is beneficial to employee wellbeing. Still, the specific reason behind implementing one will vary from one company to another. The company might primarily want to be competitive in terms of benefits, better manage employees’ time off, increase productivity or some other reason. A clear objective in administering a paid-leave program guides the company in what type of leave to give its employees, how much leave to give and when to give it. By extension, this also provides the company with a good picture of how such a program will affect it.

2. Identify the legal requirements

As some unpaid leaves are tied to labor laws such as the Family and Medical Leave Act (FMLA), paid leaves also answer to legal requirements. A company should identify what the state or federal laws require regarding providing paid leaves to employees. Employers are not compelled to administer paid leaves under the Fair Labor Standards Act (FLSA), but they are prohibited from withholding pay or exempting an employee for absences because of illnesses or disability. This prohibition applies unless the employer has established a program for paid leave reserved for the absences or the exempt employees are either ineligible or have consumed the benefits given to them.

3. Determine the type of leave to give

Based on the company’s objective, it should identify what kind of leave it will provide its employees. A company may offer vacation, sick, personal leaves or a combination of two or all of them. Another type of leave would be a PTO (paid time off), which employees can use for any reason.

4. Determine eligibility

After identifying what type of leave to give, a company should identify which employees are eligible. A company may choose to give employees the same paid-leave benefits, or they may opt to provide different types to other employees, assuming doing so won’t discriminate against a group and abides by state and federal laws. In addition, employers must look into whether part-time workers will be eligible for paid-leave benefits.

5. Determine how much leave to give and when employees will earn them

The next step is to establish the number of leaves to give based on the type of leave the company decides to provide their employees. A company that offers leaves separated into vacation, sick and personal leaves may provide a different number of leaves compared to a company offering PTO leaves.

After the amount of leave has been determined, the company must decide whether to give employees a chunk of their paid leaves at the start of the calendar or employment or to have employees earn paid leaves according to the number of hours they’ve worked. Another consideration would be allowing newly hired employees to accrue leaves immediately or after working for a set amount of time.

6. Determine when and how leaves can be taken

The company policy should clearly explain in what increments paid leave can be used. The most common increments would be full-day or half-day leaves, while others offer smaller increments. It should be clear in the policy if there are limits to the amount of vacation time they can take. Blackout periods, or a period where leaves are not allowed, should also be defined. Additionally, a company should decide whether employees or some employees will be required to take time off work; decide whether unused paid leaves expire after a set date.

A procedure regarding the filing of leaves should be established as well. Employees should know how they should file a leave and the process of its approval or denial. It should be ensured that the paid-leave program is compatible with human resource information systems and payroll software.

7. Identify payout after termination practices

Your company should determine whether state law has mandates regarding the payout of leaves after an employee is terminated. If state law doesn’t require it, company policy should define whether the company will pay out unused leaves at termination and what qualifies an employee for the payout. Payout of leaves upon termination generally doesn’t apply to paid sick leaves.

8. Write a policy and disseminate it to staff

The last step is for the company to write a company policy that includes all the rules and procedures surrounding the paid-leave program. The company’s HR professionals should keep employee handbooks up to date and ensure that the policy and any changes are communicated clearly to everyone. Employees should be asked to sign an acknowledgment that they’ve received a copy of the policy and understand it.

There are more considerations when developing and administering a paid leave program, but these steps should provide a good grasp of the most crucial. Having a well-designed and well-executed paid-leave program is a step towards getting better employee engagement statistics, which not only helps the employees but also the business itself.