Successfully running a staffing agency means prioritizing compliance at all times. No matter the size of your recruiting business, you will need to maintain compliance across multiple functions. Most business owners recognize that payroll, workers' compensation, and tax mandates all come into play with every hire. However, some recruiting companies may not recognize the need for maintaining paid time off (PTO) payout compliance — until it's too late.
PTO payout can prove exceptionally tricky for staffing agencies that recruit for jobs across multiple state lines. It’s not enough to understand the PTO rules for each state while a contractor is working. Staffing agencies must also know and comply with the specific PTO payout laws by state when a contractor leaves a specific job. Answering the question, “What are the PTO Payout Laws by State?” is often tougher than they think. Not only does each state have its own legislature regarding PTO payout requirements — but the laws themselves are constantly changing, making it difficult for staffing companies to keep up.
Noncompliance with current PTO payout regulations can negatively impact your business reputation and your bottom line. Noncompliance with state legislation can bring with it fees and penalties. Noncompliance can also require taking resources (or yourself) away from core business functions to get your current workforce aligned with mandatory PTO payouts based on contract placement.
Additionally, your employees themselves may respond negatively to noncompliance with PTO payouts. Failing to adhere to state requirements could impact how both clients and candidates perceive your brand — it can also increase overall risk and liability for your staffing agency.
As already noted, the state laws for paid time off can (and do) change often. However, according to Unemployment.gov.us there are currently 24 states that require vacation payout upon termination of employment:
The current legislation also includes the District of Columbia.
While it’s important to know which states require PTO payout, it’s also essential for staffing agency owners to understand that there could be varying details to every state’s requirements. Staying on top of constantly changing laws and the nuances between legislation in every state is a full-time job in itself. At best, managing PTO payout laws internally means taking your own employees away from their primary functions (aka finding and filling open reqs) within your company. At worst, your staffing agency could find itself taking on unnecessary risk and liability.
As a result, many recruiting companies leverage the power of an Employee of Record (EOR) provider to manage all of their compliance needs, including PTO payouts across every state. An experienced EOR provider assumes full responsibility for every employee, ensuring full compliance at all times for all active contractors. They keep up with constantly changing legislation and absorb all employee risk, enabling your staffing agency to get back to the business at hand — filling job orders.
Contact Headcount Management today to discuss your company’s PTO compliance needs and learn more about how an EOR provider can save you time, energy, stress, and money.
Also, be sure to download our free guide: How to Stay in Compliance: A State-by-State Guide to 2021 IRS PTO Regulations to take a deeper dive into current PTO legislation for each state. Click here to access your copy today!