Colorado employers may want to consider tracking paid vacation and paid sick leave separately for easier compliance with HFWA.
Although several states have specific paid leave laws, for the purpose of this article, we are highlighting regulations in the State of Colorado.
While a paid time-off policy isn’t required by law under the FLSA (Fair Labor Standards Act), sick leave is now becoming a requirement across many states.
Paid Vacation
When it comes to vacation leave, Colorado Employers are not required to provide paid vacation. However, if you do offer paid vacation, we recommend using a simple calculation of time accrued or earned over a period of time to determine the amount of leave an employee can take.
Keep the following tips in mind when crafting your paid vacation policy:
- Treat hours as vested wages once they are earned. Although not clearly forbidden by law, the statements of the Colorado Division of Labor & Employment (CDLE) indicate that “use-it or lose-it policies,” or policies that cause vacation to be forfeit at termination, are not acceptable.
- Consider creating a limit on vacation accrual, so that once that limit is reached, employees will no longer accrue additional time off until they use some of the hours currently available.
- Consider giving an extra allotment based on milestones with the company, for example, increases based on number of years with your organization.
- Base the amount of leave on accrual instead of lump sum bank, which is simpler to implement and limits Employer liability in terms of payout.
- Determine how leave accrual is based — calendar year or anniversary date of employment.
Paid Sick Leave
The Colorado Healthy Families and Workplaces Act (HFWA) requires Employers to provide paid leave to their employees in certain situations. When it comes to sick time, this is where legislation clearly defines your sick leave policy for you.
With such detailed requirements for the Employer, we highly recommend tracking Sick Leave separately from Vacation or any other type of leave or paid time-off.
For example, the following outlines some* requirements that are necessary for Sick Leave under Colorado’s HFWA:
- Employees must be allowed to use their paid sick leave in hourly increments unless Employer allows in smaller increments.
- Employers may not require that an employee try to cover their shift as a condition of using paid sick leave.
- Employers are not required to pay out an employee’s unused sick leave when an employee separates from employment (whereas vacation is looked at as vested wages earned and thus required to be paid out upon separation).
- Employers must provide an accounting of an employee’s accrued, used, and available sick leave upon request, but not more than once per month (this can get complicated if sick leave is lumped in with an overall PTO policy).
- Employees may request to use their paid sick leave orally or in writing, including electronically (this could be different from your standard expectations for requesting vacation or other types of leave).
- If an employee is rehired within six months the Employer shall reinstate any sick leave the employee accrued by had not used during previous employment.
If you are an ASAP payroll client, ask your account manager about our Sick Leave Policy Templates that integrate with our payroll processing software (one-time fee may apply).
Time-Off Policy FAQS
If you are in a state, county, or city that requires Employers to offer paid sick leave and you decide to offer it as part of an overall PTO plan instead, it is critical that you ensure the plan meets all the requirements of the mandatory sick leave law or ordinance.
These requirements usually include letting employees use their time in small increments (e.g., one or two hours), ensuring that they accrue PTO fast enough, and allowing carryover into a new year. If you’re in one of these areas, you’ll definitely want to take a close look at the law or ordinance to ensure your PTO program is compliant.
For example, with the Colorado HFWA, paid sick leave does not require additional leave if an Employer policy provides fully paid leave for both sick and non-sick leave purposes (e.g., sick time and vacation) and makes clear to employees, in a writing distributed in advance of an actual or anticipated leave request, that:
- its leave policy provides PTO
- (1) in at least a number of hours and amount of pay sufficient to satisfy the paid sick leave law,
- (2) for all the same reasons covered by the paid sick leave law (not a narrower set of reasons), and
- (3) under all the same conditions as under the paid sick leave law, not stricter or more onerous conditions (e.g., accrual, use, payment, carryover, notice, documentation, anti-retaliation);
- additional paid sick leave will not be provided when an employee uses all PTO for reasons that don’t qualify for sick leave (e.g., vacation).
The paid sick leave law does not invalidate collective bargaining agreements that provide equivalent or more generous paid leave.
Regardless of which benefits you offer, you’ll want to make sure they are clearly articulated in writing and that all employees are made aware of what is available and how the policies operate.
If the differing amounts of vacation are based on clearly defined employee groupings, such as seniority, department, or exempt versus non-exempt status, then you can offer differing paid time off benefits based on these segments.
Where you can run into trouble is offering different amounts of vacation on an individual basis or without clearly defined criteria, either of which can lead to discrimination claims. For example, if Joe and Sandya are hired at the same time for similar jobs in the accounting department at the same rate of pay, but the organization offers Joe more vacation, Sandya could potentially bring a claim under federal or state discrimination or pay equity laws.
To be more specific, Employers are not required to pay out sick leave upon separation of employment. However, Employers are required to pay out any vacation balance. Vacation pay is considered as vested wages earned and thus required to be paid out upon separation.
This is all the more reason to offer, track, and manage paid vacation separately from paid sick leave.
With Accrual, employees accumulate a given number of paid-leave hours per pay period, or sometimes per hours worked. If your organization is cost conscious or has high turnover, accrual may be the best method for you. The downside can be the administration, UNLESS you are tracking accruals with your payroll processor.
The front load, or lump sum, is an approach to alleviate some of the administrative burden, but it can also cause some HR headaches. For example, an employee uses all of their time off at the beginning of the year and then leaves the company. Or worse, an employee could be entitled to that benefit as earned wages and therefore due all of that time off payment upon separation.
While some Employers may try to charge the employee (or deduct) on their final paycheck, not all states allow you do this. Additionally, If the time-off allotment is set to happen January 1st for all employees, that may cause additional questions and confusion for employees who are hired mid-year versus those hired in December and what that means for their accruals.
We recommend using the accrual method as this presents less room for errors and HR headaches. Here’s a good example:
| Length of Service | Current Annual Vacation Benefit | Accrual Per Pay Period |
|---|---|---|
| 0 to 3 months | 0 days | 0 hours |
| 4 to 23 months | 5 days per year | 1.53846 hours |
| 24 months and over | 10 days per year | 3.07692 hours |
TIP: As a payroll processor, we especially appreciate the length of service in months as payroll software can track most accurately.
Unfortunately, there is no industry standard, and thus businesses are left determining their own renditions of a time-off program. This lack of standards makes it tricky to create a solid policy that works for both the employee and the organization, as well as alongside your payroll processing platform. With ASAP Accounting & Payroll servicing over 900 small businesses, we’ve seen our fair share of both good and not-so-great time-off policies.
Attributes of a good time-off policy:
- It’s attractive to employees; after all, seeking and keeping top talent is challenging in today’s labor market.
- Make it understandable: Is it clear how time is tracked/accrued? Are there restrictions or limits? Does it carry over from one year to the next? And if so, how much carryover? Does accrual start at beginning of employment? Is there a waiting period before employees can use it? Is it given in one lump sum at the beginning of year or accrued with each payroll?
And for you, the Employer….
- Make it easy to calculate time-off alongside compensation
- Integrate time-off with payroll processing. For example, accruing amounts per hour worked or per pay period are specific and usually easily managed within your payroll system.
We also recommend unpacking these policies from your overall Employee Handbook, as these benefits in particular may change more frequently than your employment policies. It’s perfectly okay to have a combination of policies rather than one novel-sized handbook. Having a concise and clear Time-Off Program with enclosed policies allow team members to easily reference anytime.
ASAP’s HUB clock can do more than just track time — it can help you manage PTO requests and approvals as well as track with each payroll. >>Ask your ASAP Account Manager how HUB can help you better manage PTO.
Another great tool is a shared company or department calendar, which allows your team to see everyone’s time off. This way, hopefully employees won’t plan vacation if they see the team is already short-handed with others out.
