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Is Your PTO Policy Competitive?

Employees have spoken – paid time off (PTO) is important. In fact, a good PTO policy is one of the most valued benefits among job seekers. According to a recent survey, flexible hours and more vacation time ranked among the top three job perks people look for – right behind better health insurance.¹

Employees like PTO because it provides compensated time off for planned absences such as vacations, routine medical appointments and scheduled personal time. PTO can also be used for unscheduled time off, such as an illness, dependent care or a personal emergency. An attractive PTO policy can be an effective tool to increase employee engagement and retention, so let’s cover the latest trends to ensure your plan is structured right.pto policy

PTO Policy Trends
SilverStone Group’s 2018 Hot Topics in HR and Benefits survey revealed that 63% of employers combine vacation and sick time into one plan, while 33% offer them separately. Many employers also offer holiday pay and bereavement leave. Although PTO is typically a benefit for full-time employees, many organizations offer pro-rated plans to part-time employees based on their hours.

Employers can struggle with the financial aspects of a PTO policy. Accounting regulations require most companies to book PTO hours as a liability on the balance sheet. The same is usually true for vacation time, but not for sick leave. While laws differ by state, most require organizations to pay employees for unused PTO and vacation hours when they separate from the organization.

We are seeing new trends in PTO accruals, as well as when employees are eligible to use earned time off. To leverage a PTO policy as a recruiting and retention tool, more employers are allowing accruals to begin on an employee’s first day. They are also allowing employees to use the hours as soon as they appear on a paycheck. Traditionally, accrual rates have slowly increased over the first five years of employment and then accelerated at year six. Many employers are now escalating the accrual rates during the first five years of employment and then slowing them down or leveling them off after five or more years.

Unlimited PTO plans are starting to gain more attention. According to our survey, 2% of employers currently have an unlimited PTO policy. With this type of plan, employees can take as much time off as they want. Although this sounds like an enticing offer, many organizations report that high-performing employees do not take enough time off, while lower-performing employees take too much time. Since these plans are unlimited, employers aren’t supposed to add up an employee’s PTO usage and therefore can’t address excessive time away as an issue unless it’s causing specific performance problems. Unlimited PTO plans also create challenges when coordinating leaves of absence (i.e., Family Medical Leave Act [FMLA] time) because employees do not have accrued time to use during a waiting period or to supplement short-term disability policies.

Is Your PTO Policy Working?
Research suggests that employees aren’t unplugging from work and using their PTO enough. Technology can make it difficult for employees to truly disconnect. A recent study of PTO habits suggests that, on average, employees only use half of their earned time off. Sixty-six percent of those surveyed admitted to working while on vacation (up from 61% in 2014). When asked why, 34% said they feared they would get behind and 30% felt no one else could do the work while they were away. Twenty-two percent admitted they were completely dedicated to their company, and 21% felt they could never be disconnected.²

Encouraging work-life balance is crucial, so it’s important to regularly assess your PTO policy to make sure it meets the needs of your employees. We suggest reviewing your plan every two to three years to ensure it is market competitive and effective as a recruiting and retention tool.

You can start by asking the following questions:

  • Does our current PTO plan meet the needs of our employees?
  • Do our employees understand our plan?
  • Are we providing enough time for employees to be away from work?
  • When do employees start to accrue PTO?
  • When can they start using their PTO?
  • How difficult do we make it for employees to request time off?
  • Is our plan in compliance with state laws?
  • When employees use PTO, do we expect them to stay connected to the office?

Fine-Tuning Your Plan
Implementing a PTO policy that fosters healthy breaks and accommodates unplanned absences can have a big return on investment. Not only can it help attract and retain top talent, but it can build a happier, less stressed workforce. SilverStone Group’s HR Consulting Team can work with your organization to benchmark and review your PTO policy. Our experts can help ensure that it is a good investment and contributes to overall employee satisfaction.

¹ “Employee Benefits Study: The Cost and Value of Employee Perks.” FRACTL website. 2018. Accessed on November 14, 2018 at https://www.frac.tl/employee-benefits-study/
² Jackson, Amy Elisa. “We Just Can’t Unplug: 2 in 3 Employees Report Working While on Vacation.” May 24, 2017. Accessed on November 15, 2018 at https://www.glassdoor.com/blog/vacation-realities-2017/

This article originally appeared in the 2018 | ISSUE THREE of the SilverLink magazine, under the title “Time for a Vacation | Is Your PTO Policy Competitive?” To receive a complimentary subscription to the SilverLink magazine, sign up here.

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