Attitudes towards flexibility in the workplace are evolving. A lot.
Long gone are the days of a strict 9-to-5 schedule. Increasingly, employers offer flexible schedules to support a better work/life balance. There’s also a growing acceptance that people have different work rhythms. When feasible, companies adjust schedules for early bird or night owl employees. Ultimately it benefits the employer to maximize employee productivity.
Similarly, vacation policies are also changing. With an average employee tenure of 4.2 years1 in the U.S., many employees never reach milestones to earn more time under traditional vacation policies. For top talent that may move around, those employers are less appealing. A PTO policy offers the flexibility employees want and the engagement and productivity employers need. Learn about this popular benefit and how it can position your company as a progressive employer.
What exactly is PTO?
Paid time off (PTO) combines vacation, sick, personal time and holidays into one bucket. The PTO allotment is either provided upfront when hired, or employees accrue PTO based on the hours worked. Similar to traditional vacation policies, employees secure approval before being away from work to minimize workflow disruptions. Depending on the policy, employees can take off as little as one hour to manage outside responsibilities. This helps employees manage their time off since their PTO must last for the year, including unexpected illness.
What are the advantages of PTO?
Whether a repairman or doctor’s appointment, vacation or school performance, employees can use PTO at their discretion without explanation. No more “proving you’re sick” or “making up stories.” With PTO, employees are entitled to use PTO however needed, reinforcing a culture of trust and responsibility. Employers are still protected from unscheduled absences with advance notice requirements. In fact, many companies report a reduction in unscheduled absences when they shift to PTO.
What are the disadvantages of PTO?
Traditional vacation policies keep sick time separate and employers aren’t required to pay it out when employment ends. There’s greater financial liability with PTO because all unused PTO must be paid. Since PTO is one bucket of time versus separate vacation/sick time, employees tend to use more of it. There’s also a perception that PTO is “vacation time” and employees come to work when sick to avoid dipping into it. Although the concept of coming to work while sick has changed dramatically given our new normal with COVID-19. Employees with greater health needs may feel resentful that they have to use a disproportionate amount of PTO for medical purposes instead of vacation.
What makes a good PTO policy?
A PTO policy should benefit you and your employees. A comprehensive, flexible and generous PTO policy makes employees feel valued and cared for. In return, you’ll enjoy increased loyalty and productivity. Any policy also needs to be realistic for your company. Let’s look at things to consider when developing yours:
- Accrue or frontload? – An accrual approach can be an administrative challenge keeping up with hours accrued and deducted. If you have high turnover, however, this protects your company from unnecessary costs. With frontloaded PTO, the administrative burden is much less, but you risk having employees use their PTO early and leaving. If this is a concern, include repayment terms in your PTO policy for time taken that wasn’t yet earned.
- Clearly defined – Be very clear about any policy differences for hourly, part-time or full-time employees and new versus tenured employees. Will you have a probationary period for new employees, or can they start accruing and using PTO immediately? Develop policies around taking time when other team members are scheduled off. Regularly email employees about advance notice requirements, blackout periods and include instructions regarding the shared department calendar.
- Support usage – If unplugging is part of your corporate culture, ask managers to proactively encourage employees to book PTO. By scheduling in advance, everyone can collaborate on how to backfill the role and they can more easily disconnect. Obviously backfilling roles depends on job class and category.
- Lead by example – Share when senior leadership is taking a larger share of PTO so you’re raising visibility and reinforcing a culture that encourages work/life balance. If possible, encourage senior leaders to unplug while away from work. This will make an impression on employees.
- Monitor state and local legislation – Before rolling out your PTO guidelines, check if there’s legislation that requires employers to provide a certain amount of paid sick leave, like in California and New York City. You should also outline what happens with unused PTO when an employee leaves.
MidwestHR is a top ranked CPEO in Illinois (certified professional employer organization). For over 20 years clients have counted on our team of experts to manage all or part of their HR functions including payroll and tax administration, benefits management, workers’ compensation, risk management and more. If you’re considering a PTO policy, we can share best practices and help you implement a program tailored to your industry. Give us a call at 630-836-3000
to learn more.
1Bureau of Labor Statistics, Employee Tenure in 2018, 20 September 2018