In times of crisis, businesses—and their employees—naturally find themselves searching for ways to help. One easy way to provide support to those who need it is a PTO (Paid Time Off) Donation Program. Employees can donate the value of the time off they have accrued but not yet used. Depending on how your program is set up, the recipient could be a specific employee, a company-wide pool or an external charity.
What is a PTO Donation Program?
It’s easy to see why an increasing number of companies are turning to PTO Donation programs. It’s not just that the public health and economic situation have caused suffering throughout the country. What adds to the unique circumstance is that due to the pandemic many employees have vacation time saved up but going unused.
With many forced to cancel trips, they risk wasting their hard-earned PTO. At the same time, while employees may be keen to help those who are suffering (whether due to the pandemic or otherwise) they may not have the spare cash to make a significant contribution. Being able to tap into their unused PTO gives employees an effective—and affordable—solution.
The Benefits of PTO Donation Programs for Employers
For employers, the benefits of initiating a PTO Donation program extend beyond simply offering a way to help out. For a start, it’s great for morale—especially if the donations are kept within the organization, and go to other employees in need. It also eats into the amount of PTO that’s left unused within the organization and so reduces the financial liability.
Lastly—in certain circumstances—the PTO donations can be tax-free.
How it Works in Practice
The biggest decision employers face is what kind of PTO Donation program you’re going to operate. Is this going to remain internal, with the recipient being specific employees? These can be identified by the donor or receive funds from a general PTO bank? This bank can be accessed when an employee suffers a medical emergency or financial hardship. Alternatively, donations can go to an external charity.
Of course, it’s possible to allow multiple options. A big factor at play will likely be the tax implications, and for more insight it’s essential to consult professional advice. Medical emergencies and major disasters affect the tax status of PTO donations, and the COVID-19 pandemic adds further complications.
Getting It Right
There are several other important issues to bear in mind when creating your plan. First of all, you’ll want to consider the financial implications. Not only will there likely be fees related to administering the plan, but you’ll have to consider the total potential cost of the PTO. If some of the accrued leave was likely to go unused, allowing employees to transform this into donations may increase overall business costs.
You’ll also want to lay out clear guidelines on how the program will work. You might want to limit the amount of PTO employees can donate at once, and in total during the calendar year. Remember, vacations offer employees a chance to relax and reenergize—and come more productive. Even with a PTO Donation program in place, employees should still be encourage to take regular leave.
Get a PTO Donation Template
To administer a PTO Donation Program effectively, you need to get the paperwork right—and ensure that all employees understand what they are signing up for. To help businesses, Paycor is offering a sample PTO Donation form, which can be distributed to and filled out by employees who wish to donate their paid time off hours. Download the template, and adapt the language to the specific needs of your PTO Donation program.
Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.