At the height of summer, swimming pools and Slip ‘N Slides aren’t the only things getting more use. Company leave policies are often put to the test as most workers take some form of vacation during the summer months. How will your company's leave plan hold up this summer season?
Paid time off (PTO) policies, or PTO banks, have become the preferred alternative to traditional vacation plans. In fact, according to a recent survey, approximately 60 percent of companies now utilize PTO banks, making it more popular than traditional policies that distinguish between vacation, sick and personal leave.
Under a PTO model, all vacation, sick, and personal days are integrated into one pool, so in theory, employees can take days off at their discretion when and as they need them without having to classify a reason. Companies of all sizes are adopting the PTO model and many are pleased with the result. For one reason, the majority of companies that institute PTO claim their businesses experience less unscheduled absences.
Experts cite other advantages to PTO banks as well:
Ease of administration. The PTO model is often easier to administer because it folds together vacation, sick time and personal leave. Vacation leave doesn’t have to be coded differently than a sick day.
Control over absences. When companies distinguish one type of leave from another, employees are likely to use every sick day granted to them whether they need it or not. With PTO banks, employees tend to save time off to use for vacation.
Recruitment and retention. Employers are finding that PTO programs can make their companies more competitive when recruiting employees.
Flexibility. The value of PTO banks is especially vital in industries that operate 24/7, such as the healthcare industry, because it offers optimum flexibility.
Diversity. Today, employees celebrate a variety of cultural or religious holidays. PTO banks reflect a company's respect for employees' diversity by allowing them to schedule time off around their individual holiday calendar.
Privacy. While most employees don't want to lie to their employers, they also may not want to announce that they are chaperoning a field trip or in need of a mental health day. A PTO bank allows employees to take time when they need it without having to explain it.
Equity. There's a common perception that employees with children are allowed more time off than single people without children. PTO banks level the playing field, because everyone has access to time off based on service, so it's objective. Of course, working parents especially enjoy the flexibility PTO banks provide, because they can stay home with a sick child or go along on a field trip without feeling guilty.
Despite these advantages, many employers and employees are reluctant to change. Others fear the unknown. Employees’ fears revolve around the possibility of an unexpected illness wiping out their accrued days, perhaps leaving them with no remaining days for an annual ski trip or visit home at Christmas.
Some employers fear potentially higher costs associated with a PTO policy. Most leave policies allow for some carryover of time into the subsequent year or years, and most also provide for some payout of unused time in the event of termination. While other leave policies allow a payout for only unused vacation time, under a PTO an employer cannot distinguish between vacation and sick leave, so all unused time must be paid out upon termination. Thus employers have to recognize PTO as a liability and they must represent and manage it as such on their books. In a better economy companies might have considered this liability inconsequential, but it has become seemingly much more significant in today’s economy when the potential for layoffs is far greater. Now, more than ever before, companies are taking into account the PTO dollars that would have to be paid out in the event of a layoff.
There’s also a notable cost associated with “presenteeism,” the lost productivity that occurs when employees show up for work, but perform below par either because they are sick or distracted. If a PTO model is in place, these employees would presumably take a day of leave. However, critics suggest that when companies switch to a PTO model, miraculously no one ever gets sick anymore. Instead, workers arrive to work running fever, coughing, and hacking, because despite an illness, they refuse to risk forfeiting vacation time later in the year. While it is difficult to measure, some estimates put the cost of employees working at diminished capacity at $250 billion annually.
So how do you decide whether a traditional vacation policy or a PTO model is right for your company? Like most things, there isn’t one method that works for all companies, so while a PTO bank may work well for some companies, more traditional plans still work better for others. Ask yourself whether your company is seeing a problem with excess absenteeism or abuse of time off. If your traditional leave policy is working, there may be no compelling reason to change course.
For companies that want to provide their employees more flexibility, a PTO bank may work better. Not surprisingly, however, proper management is key to ensuring that PTO works effectively. Many companies encourage employees to use leave time by enforcing “use it or lose it” policies and setting carryover limits or accrual caps. Some companies even establish buy back or donation provisions to allow employees to sell or donate unused days to coworkers who may have a greater need.
Finally, no matter which type of leave policy your company may have in place or plan to adopt, remember this – paid leave, no matter what form it takes, is an essential employee benefit, and it can serve as a powerful recruitment and retention tool. So long as your policy works to attract and retain the quality employees you want, then relax and don’t sweat it this summer.
