Donate Unused PTO to Colleagues in Need Through a Leave-Sharing Program

By Rob Whalen - Nov 10, 2022 8:00:00 AM - 7 MINS READ

Here at PTO Exchange, we have shared several ways employees can use their unused paid time off (PTO) quite a few times. While employees can use unused PTO for travel, financial planning, or charitable contributions, what if it could be donated to help someone in need? A leave-sharing program is a way employees can be sure that their hard-earned PTO does not go to waste–in the best way possible. If you’re looking for an extra morale boost for your office, check out how implementing a leave-sharing program could be the perfect solution. 

Put unused PTO to good use

Unlike other forms of PTO, leave-sharing programs consider those impacted by emergencies. With PTO sharing, employees are the ones who donate their unused PTO in case a fellow employee can have the necessary time away. While employees are more likely to donate to the leave pool, companies are also strongly encouraged to make donations. 

Instead of being an exchange of PTO to a specific employee, leave sharing permits unused PTO to be collected for the greater good through a sharing bank. A leave-sharing can leverage accrued, earned, unearned, vacation, sick, and other forms of PTO; however, the IRS approves the following two criteria for tax accommodations:

  1. Medical emergency: Individual/ family member of the individual requiring a long leave of absence
  2. Major disaster exemption: the disaster is declared by the President (like COVID-19)

Who can use leave-sharing programs?

Regarding who can participate in leave sharing, there are no rules. But when it comes to taxes, there could be some implications for the donor, according to the assignment of income doctrine. Given the following two exceptions, the tax will be on the recipient:

Emergency Medical Leave:

In a medical emergency, it can be difficult to predict how many days you will need to give yourself or your family member the proper care. With this being said, emergency medical leave can be available permanently. Through leave sharing, employees can get this extra time; however, several criteria must be met to be considered by the IRS:

  1. It must be in writing and administered to the employer
  2. Specifies leave is only for medical emergencies (illness or death of individual/family member)

Federal Disaster or National Emergency:

Unlike medical emergencies, federal disasters or national emergencies must be declared by the President of the U.S under the Stafford Act, which can exist for up to eighteen months.  After this nationwide recognition, employees facing an emergency's adverse consequences may utilize a leave-sharing program in the case of needing extra days off. Similar to medical emergencies, federal disaster or national emergencies must follow these requirements to be considered for leave sharing:

  1. It must be in writing 
  2. Based on the severity of the event 
  3. Only for employees directly affected by disaster

How does a leave-sharing program work?

In a typical leave-sharing plan, an employee chooses to donate hours of paid leave to an organization-managed “leave bank.” Generally, the employee seeking to draw from the leave bank must submit a request for approval from the employer.

Companies can also make one-time or ongoing monetary donations to employee leave-sharing pools.

Any eligible employee can donate unused vacation or PTO, but they must donate to an established “sharing pool” or leave bank, not to a specific colleague. 

The PTO Exchange platform allows your company to customize qualifications or circumstances for employee eligibility. It is a simple four-step process:

  • Request: An employee fills out a request form, which can be customized for specific circumstances.
  • Review: An adjudication process accepts or declines the request based on defined criteria. PTO Exchange or internal HR can act as adjudicator. 
  • Notification: Approval or decline is communicated to the requester.
  • Dispense and decrement: If approved, hours are automatically added to the employee’s leave balance and reflected on the pay stub.

PTO Exchange integrates with your payroll system and simplifies the allocation of time based on the hourly earning rate of each employee. Plus, it can be turned on expeditiously—as quickly as 24 hours—if the need arises.

Leave-sharing benefits you and your colleagues 

Cash is king–that is, everywhere except in a leave-sharing program. With so many policies offering financial assistance, leave-sharing programs are funded with one thing only: PTO. Through this form of exchange, employees in a bind can receive the extra time they desperately need. 

PTO policies can look different in every state–especially if “use it or lose it policies” are enacted. Employees may feel more inclined to put their unused PTO to good use instead of being lost altogether. It is important to know that donations made by employees are not included as income for tax purposes. 

According to IRS guidance, donor employees can donate without any negative implications. On the other hand, the recipient employee is taxed in the form of wage compensation. Keeping donations tax-free will further incentivize employees to continue to utilize leave-sharing programs. 

At the end of the day, employees helping out their fellow employees fosters a positive work environment. Especially if there is leftover PTO, why not offer it to someone who needs it the most? As work culture continues to be a driving force for prospective employees, implementing a leave-sharing policy will give your organization a competitive advantage in attracting and retaining employees.

Help is on the way

In a time of need, employees are desperate for flexibility. While emergencies are hard to predict, providing your employees with a program where extra PTO is available will help them feel supported and valued. If you’re interested in everything a leave sharing can do for your organization, request a demo of our platform today.

Rob Whalen

Rob is co-founder and CEO of PTO Exchange.

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