Know your P(S)L: It’s time to update your paid leave policies

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PSL, PFML, PTO…no, it’s not your Starbucks order, although relative to today’s topic, many would prefer to consume those disgusting orange coffee milk thingees. (I said what I said.)  

When you get your next “PSL is back!!” text, take it as a reminder to revisit your paid leave policies, which may have multiplied and bred new acronyms. They certainly have in the last two years. 

We tend to think of “paid leave” as a long-term hiatus for medical reasons. But, there are up to a dozen categories of paid leave that apply to business owners, perhaps even when you don’t have employees. 

Beyond compliance, leave policies for purpose-driven founders signal what we value. My company’s standard work week is 32 hours over 4 days. We also observe the federal holidays on my son’s school calendar because those have been my Day One values for this company. As a result, we have a little less PTO because every week is a 3- or 4-day weekend. My policies directly impact our service design, operating budget, and staffing plan. 

Before you adjust wages, evaluate your mandatory and voluntary paid leave policies. Like a Chipotle bowl in an inflationary economy, you might be paying the same but getting less. If that’s your plan, be clear with your team that you’ve decided to hold salaries while reducing work hours. 

Set your 2023 calendar and clearly communicate just how many days off people get. Set it up in your payroll system. And, if needed, update your employee handbook for January 1.

Federal and state holidays

There are now 11 federal holidays. Although you are not required to close, most companies observe New Year’s Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving, and Christmas Day. Some considerations:

  • Is observing (or not observing) this holiday important to the culture I’m cultivating? 
  • Will much of my team be out or unfocused because school is closed?
  • Do I have to pay time and a half to stay open? 


Paid time off (PTO)

In addition to your paid holidays, you’ll probably offer at least 40 hours a year of paid time off to your full-time team. Note, this is the one type of leave that has no federal, state, or local minimum requirement. However, if you do offer it, you’ll need to comply with state labor laws for annual carry over and pay out of accrued hours. PTO used to be a catchall for vacation time and sick leave. Some states still allow combined time, but it’s becoming more common that you’ll need a distinct sick leave policy. PTO may accrue over the year or be awarded up front. Sometimes awarding upfront will mean you don’t have to pay out upon exit – here’s a dismissal paycheck requirements summary from Gusto


Sick leave (PSL)

Currently, 23 states have local or statewide PSL requirements, often for both full- and part-time employees.  Gusto maintains a thorough summary of sick leave regulations, including local exceptions. If you’re not in one of those places, you can craft a policy or not. PSL may accrue over the year or be awarded up front. Some states require rollover of unused time up to a maximum. No states require payout at exit for unused days.


Paid family and medical leave (PFL or PFML)

As of January, 11 states and the District of Columbia will have active PFML policies. (Check out this site for a nice chart by state.) These systems usually work similarly to unemployment — everyone pays some payroll taxes into the system and, after a minimum contribution period, can get a portion of wages replaced when they need to take leave. Note, if you’re self-employed or a sole proprietor, you may be able to opt into these programs for an incremental quarterly payment. 

If you’re not in one of these states and have fewer than 50 employees, you’re not required to have a stated paid medical or maternity leave policy. Again, this might be a purpose-driven decision for you, so you can certainly offer this at your discretion. Companies with more than 50 employees are governed by federal FMLA for up to 12 weeks of unpaid leave for employees with more than 1 year of service.


Unlimited leave

Unlimited leave has grown in popularity because you can offer a unified national leave policy, avoid accruals, and aren’t required to pay anything out when people leave. If you’re considering unlimited leave, get an employment lawyer. Do not copy and paste your friend’s tech company policy. If you like the policy, take it to a lawyer and discuss what you’re hoping to achieve. You need clearly written policies that meet or exceed the requirements in all of your operating jurisdictions. Even with unlimited leave, you’ll still need to comply with your state’s paid leave program requirements, as these involve payroll taxes. 

Other leave policies

Bereavement, jury leave, organ donation leave, voter leave, and military service may all be statutory leave types that you’ll need to understand. Often these are informal when you’re a small company, but the best practice is to notify employees in writing of their rights via an employee handbook. SHRM offers its members a service that generates a minimally compliant multistate handbook for $400. 


One new one

Since the Dobbs decision, some multistate employers have designed paid leave and cost reimbursement policies for employees to obtain pregnancy-related healthcare. This is an entirely voluntary policy. In a small company, your team may know where you stand, but if it’s important to you, work with a lawyer to write a clear policy.

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