From JRG Advisors
Many employers and fellow employees want to help their employees and co-workers when there is a situation where they need to be away from work for an extended period of time but do not have paid time off (PTO) days left. These situations could range from natural disasters to an employee’s or employee family member’s serious illness. When times like this occur, having a PTO donation policy in place allows the donation of accumulated PTO from employees from a general pool. This allows employees to help their co-workers in a time of need, avoids “wasted” PTO, and could boost a positive work environment.
There are a few steps that an employer must follow in order to create a PTO donation policy. The first step is to decide when donated PTO is made available. Per IRS guidance, this should be limited to federally-recognized natural disasters, medical emergencies, or both. The employer should clarify and make clear the definitions of what exactly constitutes a medical emergency or natural disaster and compare this with IRS guidance. This will alleviate any confusion in the future. Complying with IRS rules is important to avoid unwanted tax implications on behalf of employees who donate PTO.
The next item for the employer is to take into consideration is the PTO “budget” for this policy. An example of this would be thinking about setting a limit on the amount of donations one can use or donate based on job titles. This will help with making sure that certain employees with the same job titles are not off at the same time. It also makes sense to establish maximum limits to the amount of PTO that can be donated, what happens is donated PTO is not used, and basic eligibility rules (how long must an employee be with the company before they may use donated PTO, for example).
The third step is to create and finalize the PTO donation policy or program. There needs to be a tracking mechanism for the donated and used PTO. Whomever is keeping track of the PTO needs to guarantee confidentiality of medical conditions of those who use the PTO for medical emergencies. When creating the policy, the employer also needs to set criteria in order to make sure that there is no discrimination within the policy. The last step is to execute and administer the plan. This may need to be announced during a staff meeting or during open enrollment for the employees in which it applies to so that they are notified that this policy exists. Employers will want to create request forms or applications for the PTO donation policy to know when PTO is needed or being given to the general pool.