Volume 17: V.A.C.A.T.I.O.N. in the Summer Time

At the height of the summer season, companies' vacation plans are often put to the test. How does your company's plan hold up this time of year? You may want to consider a Paid Time Off (PTO) bank as an alternative to a traditional vacation plan.

A recent survey conducted by the International Foundation of Employee Benefit Plans (IFEBP) shows that tradition rules when it comes to the favored structure of vacation plans. Among more than 400 corporate and public employers surveyed, 75 percent offer paid time off specifically earmarked as vacation days. However, 25 percent use paid time off (PTO) banks, which group vacation, sick and personal days under one plan to be used as the employee chooses.

With a PTO bank, all vacation, sick, and personal days are integrated into one stockpile, so employees can use the time as needed. Employers of all sizes are testing the PTO bank concept and many are pleased with the result.

Experts cite several advantages to PTO banks:

• Ease of administration. The PTO bank is often easier to administer because it folds together vacation, sick time and personal leave.

• Control over absences. When various types of leave are separate, employees are sometimes tempted to use sick leave 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 holidays. PTO banks reflect a company's respect for employees' diversity by allowing them to schedule time off around their 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 their first grader's field trip or taking 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 perception by some that employees with children receive more time off than single people without children. PTO banks level the playing field. Everyone has access to time off based on service, so it's objective.

Despite the advantages, PTO banks still are not widely utilized.

"Employees and employers both tend to fear what they don't understand, or they are simply reluctant to change," said David Vasquez, Vice President, G&A Partners, a Houston-based HR and administrative services company.

Vasquez points out that employees' fears center around the possibility of an unexpected illness wiping out their stored bank of leave. The answer: "Employers must have a short-term disability (STD) plan as a safety net to fill the gap between the PTO bank and long-term disability," advises Vasquez.

When considering switching to a PTO bank, companies need to pay particular attention to the nuts and bolts of the new plan:

• Carryover. 75 percent of those responding to the IFEBP survey allowed carryover of vacation/PTO days into the subsequent year or years, but most capped it because unused time must be paid out on termination and is a liability that must be reflected in the books.

• Buying and selling. 6 percent of employers responding to the survey allowed employees to buy additional time off; 15 percent allowed employees to sell excess time off; and 5 percent allowed employees to buy and sell time off.

• Donation. 21 percent of respondents created a leave donation provision allowing employees to donate earned time off to other employees who need additional time because of a personal or family medical emergency.

• Accrual. Employers have to decide whether accrual will be on hourly, half-day, or full-day increments.

How do you decide if a PTO bank is right for your company? To answer that question, ask yourself whether your company is seeing a problem with excess absenteeism or abuse of time off. If your vacation and leave plans are working, there may be no compelling reason to change course. But those who have put a PTO bank to the test generally give it high marks.

If you have questions about PTO banks, call David Vasquez at 713.784.1811, or via email at dvasquez@gnapartners.com.