With the movement from traditional paid leave plans to paid time-off banks, many employers may wonder if the switch is effective in managing employee absences. Nearly one in five employees in the United States receive leave in the form of a PTO bank, but the contours of such policies are often little understood - especially outside of the human resources community, according to a new study out by the Institute for Women's Policy Research and CLASP, a nonprofit that works to improve the economic security of low-income families.

Among employees with paid leave, lower-wage employees are less likely to have access to a PTO bank than a traditional paid vacation system. Fifty-one percent of employees in the lowest average wage quartile have access to any vacation time, and only 9% of the lowest wage employees have access to a PTO bank, while 89% of employees in the highest wage quartile have access to vacation time, and 28% have access to a PTO bank. Similarly, part-time employees are less likely to have a PTO bank with 9% of part-time employees having access to a PTO bank, as compared to 23% of full-time employees.

"When workers have access to paid leave, employers more often keep their employees, and that is an important and too often overlooked piece of the job turnover cost story. Yet, 40% of low-income working parents lack any kind of paid leave - no vacation, no sick days, no parental leave, nothing at all," says Jodie Levin-Epstein, deputy director at CLASP.

In 2006, a Society for Human Resource Management article reported that the number of organizations moving to PTO banks had stopped growing, citing surveys conducted by Alexander Hamilton Institute that indicated that the percentage of employers using a traditional leave policy (56%) as opposed to a PTO bank had remained the same in 2005 and 2006. Other surveys reported a decline in the number of employers offering PTO banks between 2006 and 2007. World at Work's most recent survey of its members (May 2010) found a statistically significant increase in PTO banks between 2002, when 28% of companies reported using them, and 2010, when the number increased to 40%.

The Bureau of Labor Statistics recently released data on PTO banks for two years (2010-2011), though the proportion of workers with PTO banks increased slightly in that period. In March 2011, its data showed interesting differences in which employers offer PTO banks and the types of workers who have access to them. PTO banks are more prevalent at larger organizations. Employees of organizations with over 500 employees were approximately 20% more likely to have PTO banks than employees in organizations with under 50 employees - 35% versus 14%.

"Data from the Bureau of Labor Statistics show that PTO systems now cover almost 20% of private-sector workers in the United States, a proportion that's been increasing in recent years," says Kevin Miller, senior research associate at the Institute for Women's Policy Research. "The reasons that PTO has become more common aren't included in the data from the BLS, but it's clear that some managers and employees are enthusiastic about a simpler system with one 'bucket' of leave."

The study also brought up the question of what happens to unused PTO at the end of the year. In a traditional leave policy, vacation days roll over, but sick days do not. How employers treat PTO at the end of the year can create different incentives. Some policies allow employees to roll over PTO into the next year, and some do not. Private studies have found that PTO banks are more likely to have time rolled over than traditional vacation or sick time. Fifty-five percent of organizations in the World at Work study reported that entire amounts of unused PTO are rolled over to the next year, and 11% reported that it is totally forfeited, with the remaining organizations somewhere in between. For organizations with a traditional leave system, 36% reported vacation time was entirely rolled over, 45% said sick time was entirely rolled over, and 10% said personal time was entirely rolled over.




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A reader comments on this story:

Posted by: Unknown

"Most employers are stopping the practice of rollover PTO, both sick days and vacation days. Employers announce the new use-it-or-lose-it policy and the immediate supervisor bucks the system with, "This isn't a good time to take vacation" or some other reason why the extra time off cannot be taken. The employees are not allowed to take the extra time that he/she has worked to accumulate and lose the pay at the end of the year due to unused accumulated time off. Companies' accounting departments accrue the vacation benefits so the funds are waiting to be distributed. However, benefits are not being paid to the employees under the use-it-or-lose-it policies being implemented. The employers are using those funds to beef up the cash-on-hand account. Something is seriously wrong with this method."

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4 PTO considerations

1. Attendance patterns and costs. If employees are missing days for reasons not covered by separate vacation and sick leave policies (such as for child care or elder care), a PTO plan may help.

2. Organization culture and attitudes. PTO banks work well in flexible organizations that regularly delegate to employees the power to make decisions. On the other hand, managers who seek to retain tight control often will be uncomfortable and resist PTO plans.

3. FMLA compliance. If your organization already has difficulty tracking Family and Medical Leave Act absences because supervisors have trouble identifying which absences to count, a PTO plan may make the problem worse.

4. State laws on pay at termination. If you have employees in states that require the payment of unused vacation at termination, and you do not want to pay this, a PTO plan may not be appropriate.

Source: payscale.com

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