Is it a sick day? Vacation day? With PTO, it doesn't matter

This summer, some small-business owners won't be trying to figure out whether employees will count it as vacation, personal days, or sick leave when they say, "I'm not coming in today."

A growing number of companies are combining vacation and sick time into one bucket called paid time off, or PTO. Staffers decide whether they're going to use the days for vacation, when someone is ill, or for family events.

"You're saying to staffers, 'It's PTO, just take it,' if you have a sick kid, need a personal day, you're really stressed out," said Gretchen Van Vlymen, vice president of Human Resources at StratEx, an HR consulting firm based in Chicago.

Forty-three percent of companies offered PTO in 2016, up from 28 percent in 2002, according to a report from WorldatWork, an association of HR professionals. The report, based on a survey of the organization's members, said 51 percent of private companies offered PTO last year.

One of the big pluses for small-business owners is eliminating the chore of tracking how many sick days vs. vacation days their employees have used. That can be particularly helpful in the growing number of states, counties, and cities where employers are required to allow staffers to accrue sick time, usually up to 40 hours a year depending on how many hours they work.

For Will Gadea, offering PTO to his five staffers means he doesn't have to be the arbiter of whether someone is really sick when they call him in the morning, coughing, and ask for a day off.

"I don't want to make employees lie to me in order to use those days up," said Gadea, creative director and founder of IdeaRocket LLC, an animated video company in New York.

But PTO isn't a panacea for time-off issues. It may not stop those workers who habitually call out on Mondays or after long holiday weekends. And some staffers may decide to work when they're sick rather than use days they want to set aside for vacation.

Employers need to deal with such situations from a performance perspective, said Kate Zabriskie, CEO of Business Training Works Inc., an employee development consultancy based in Port Tobacco, Md. That means talking to workers if they come in sick and letting them know they're probably better off at home.

"If they're not performing well because they're ill, I'd say, 'You've got to be here and ready to do the job,' " Zabriskie said.

Van Vlymen suggested starting a conversation with the staffers who tend to call out after weekends, noting a pattern and letting them know that if they have a problem, help is available.

Another issue can be if employees run out of time. It can happen if they take vacation time, some personal days for school events or to be home with sick children, and then come down with the flu at the end of the year.

When a staffer is running out of days, especially if it's a highly valued employee, it can be tempting for the boss to say, "Don't worry, we'll pay you for the days you missed." But unless other employees also get extra days, that leniency can be seen as unequal treatment, and can become evidence in a discrimination lawsuit.

"You need to remain consistent. You can't look the other way for one person," said Eric Cormier, a consultant with the Houston-based human resources provider Insperity Inc.

One solution is that if staffers are able to work from home and aren't too sick, they can telecommute to avoid using PTO.

Companies where employees don't have that option can also be creative. At Motev LLC, a Los Angeles-based limousine service, employees accrue PTO as they work. If staffers use up their time and need more days, owner Robert Gaskill will structure the work schedule so they can accrue more hours.

If drivers are sick and come to work, the law prohibits them from driving, so Gaskill assigns them to work in the office.

Some companies award top performers PTO as a kind of bonus, sometimes with cash, too.

"We'll consider either advancing PTO [from the next year] or granting additional days the way we also have employee spot bonuses for doing an awesome job," said Grace Carr Lee, executive director of Hoge Fenton, a law firm based in San Jose, Calif.

Conversely, underperformers may just have to lose pay.