It's Time to Evaluate PTO Benefit Policies in Your Practice (Part 2 — Accrual of Benefits)

Managing PTO in your dental, optometry, veterinary or medical practice can be a headache. In Part 1, we examined some of the different ways to allocate paid time off to doctors, dental hygienists, opticians, insurance coordinators, and other healthcare employees. Now, it's time to consider the accrual rates you allot to these employees!

There are two main accrual methods you need to know about: 

• Lump-sum (annual accrual of benefits)

• Progressive (per hour accrual of benefits)

Typically,  practice managers pay lump-sum accruals to full-time employees (and exempt employees) and progressive accruals to part-time employees. A dental office manager, for example, might use the lump-sum method for their small team of dental assistants and front office staff. 

But there's a lot more to it than this. 

We're going to explore both methods for accrual of benefits…

Lump-Sum (Annual Accrual of Benefits)

What is it?

Employees receive a “bank” of hours for a specific time frame and you pay them for any unused hours. This process repeats each year.

Pros

• The simple option. You pay your practice's employees for all unused hours and start clean each year. 

• Easy tracking and documentation for your practice. 

• You still pay accrued/unused vacation/PTO at the end of the year (or anniversary) if applicable in your state.

Cons

• New employees or employees that have recently hit their benefit year renewal could leave the practice shortly after receiving their lump sum PTO which would need to be paid out if you are in a state that requires PTO payout upon separation of employment. 

• If you are in a state with a  “use it or lose it” policy, employees might feel obligated to use their time off before the end of the benefit year.

• For states with required sick leave benefits, such as California, employees working limited hours get more favorable benefits than normal. A part-time pharmacist working 8 hours per week, for example, would get 24 hours of benefits upfront. This pharmacist wouldn't earn 24 hours otherwise. (You could create different PTO benefit policies for part-time employees to get around this.) 

You'll benefit greatly from good HR tools when using the lump-sum method. Calculating and tracking benefit accruals and usage manually (or using outdated software) just leads to costly mistakes — and even lawsuits if you mess up employees' benefits. 

Recommended reading: "Clearing Up California’s Sick Leave Laws: Rollover vs Lump-Sum"

Progressive (Hourly, Weekly, Bi-Weekly, Semi-Monthly, Monthly, or Quarterly Accrual of Benefits)

What is it?

In the simplest of terms, progressive accruals means employees earn benefits throughout the year based on the number of hours they work. 

An example:

• A dental assistant who earns 1 hour of vacation for every 40 hours worked accrues 0.025 hours of vacation per hour worked. (This is the smallest increment of tracking possible in a progressive accrual.)

In contrast, if you allotted benefits to accrue per month, the dental assistant's figure changes. The above example works out as 40 hours per year/12 months = 3.333 hours per month worked. (Employees earn benefits regardless of hours worked each month.)

In California, the minimum accrual rate must be a minimum of 1 to 30 or 0.0334 per hour worked if your PTO includes sick leave. This is where we see the benefits of separate sick and vacation policies. When you split policies, you can adhere to mandatory sick leave requirements. However, commit to any length of time greater than “per hour” and the number of hours employees work in that period doesn’t matter. In other words, employees automatically receive allotted benefits as long as they work in that time frame.

There is a huge con to the accrual method:

• It's tough to track. Many states require you to "roll over" hours, which requires a robust time clock system. We think this is almost impossible without the right time attendance and time tracking HR tools. 

Again, we can't stress enough the importance of including accrual (and PTO) policies in a customized employee handbook. We've seen practices make small changes to policies without updating their handbooks, which opens them up to all kinds of lawsuits where employees dispute hours. 

Recommended reading: We've compiled a list of the key policies you need to include in your handbook. Click here to read!

Final Word

Consider both the lump-sum and progressive methods for accrual of benefits in your practice. Still not sure? Talk to a healthcare HR specialist who provides you with some perspective.

A competitive benefits package attracts and retains talent in your practice, but you need the right HR tools like time tracking and attendance sheets, one-click payroll, secure document vaults, and consulting services to mandate and maintain your PTO benefit policies. This is where HR for Health comes in. Schedule a call, phone (877) 779-4747, or email compliance@hrforhealth.com to learn more.

About HR for Health

HR for Health is one of the nation’s leading Human Resources Management Systems (HRMS) used by small to mid-sized practices. HR for Health is an all-in-one HR software solution dedicated to helping the dental, optometry, and veterinary industries. Our human resources platform features all the tools practice owners need to manage payroll, timekeeping, 401(k), and more with total integration and ease.

Whether you’re looking for HR support for a small business or you’re a large group dental practice, HR for Health has the solution to fit your practice and budget. Reach out to an HR for Health account representative to learn more, today: Book Time Here

Quick note: This is not to be taken as legal or HR advice. Since employment laws change over time and can vary by location and industry, consult a lawyer or HR expert for specific guidance. Learn about HR for Health's HR services.