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Ways employers should strategize on paid time off benefits

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Paid time off is one of the most desirable benefits, and often the most negotiated benefit for applicants. Whether the time is allocated in buckets of vacation, sick, and personal leave or lumped together under a single policy, a 2019 WorldatWork PTO study found that over 60% of employers design and market their PTO policy as a way to attract and retain employees.

Design, strategy, and company dollars continue to be redefined to create a competitive total rewards package encompassing base salary, wellbeing, benefits, recognition, and development promoting employers of choice. Companies large and small would do well to incorporate the following strategies into their compensation packages:

  • Unlimited PTO – Employers, start-ups and nonprofits are offering this perk.
  • PTO buy/sell plans - These allow an employee who needs additional days off to purchase additional PTO on a pre-tax basis, or sell PTO back to the employer.
  • Mandated or employer-sponsored paid leaves – This leave allows for parental leave, leave for school activities, or to seek medical treatment.
  • Expanded parental leave policies - Offering these expanded or unlimited leave and PTO policies enable employees to have more time away without the need to tap into their traditional paid time off.

Unused PTO
Even with PTO topping the list as the most desirable benefit and companies expanding PTO policies, according to surveys conducted by both U. S. Travel and WorldatWork, employees increasingly leave PTO on the table. A study by Namely found that employees with unlimited time off take two days less than the average for employees with a limited PTO policy. These employees cite competition within employee groups to see who works harder, who can move up the corporate ladder faster, or gain access to better projects by not taking time away.

The Shocking Costs of Unused PTO
Stress, productivity, health, happiness, and creativity are costs of unused PTO that can be measured by factors such as rate of turnover, health care costs, and accountability measures. The individual costs to employees who have no ability to roll-over their PTO can be over 200 million days lost annually. This loss equates to employees giving up $62 billion in benefits for an average of $600 annual loss per employee.

Costs associated with the PTO carryover liabilities from U.S. companies, according to the U. S. Travel survey, equals $224 billion annually. Although with unlimited PTO there is no accrual of PTO, therefore, there is no payout required at termination of employment and no balance that employers need to carry on the books.

Time off barriers
When employees are working in a non-supportive culture, it can be a barrier to their using earning time away from the office. Companies have been known to utilize a variety of passive-aggressive tactics with employees. The U. S. travel survey found the following cultural perceptions from employees in regards to leaving PTO on the table:

  1. Returning to a large work-load;
  2. Inability to rollover or bank time;
  3. Not being able to financially afford time off;
  4. Time off becomes harder with advancement in the company;
  5. A desire to show dedication to work;
  6. Fear of being seen as replaceable.

Employees also save or bank their time for high impact life events, (medical necessities, family/ caregiver needs, births/adoptions). The U.S. does not mandate a paid Family Leave (with the current COVID-19 or state law exceptions). As a result, many employers do not provide for paid leave. The good news: a Mercer study shows that the gap is closing, however, with 40% of employers surveyed offering a paid parental leave policy.

Holistic Well-being Culture
A work and well-being survey conducted by the American Psychological Association (APA) found that the positive effects of returning from paid time off left employees with less stress, increased energy, more motivation, and a positive mood. These resulted in an increase in productivity and quality of work.

Leaders can build a supportive culture by:

  1. Using PTO when sick or in need of mental health days and for vacation themselves. If leaders come to work ill that can send a negative image to employees.
  2. Encouraging others to use PTO and then sharing positive experiences of being away.
  3. Supporting “unplugging” from work-related technology, using out of office messaging, and phone apps such as Thrive Away to block time away.
  4. Reviewing workload and cross-train so the important work has coverage.
  5. Allowing employees to have appropriate time to transition smoothly back into daily routine.

By building a supportive wellbeing culture around PTO benefits, a positive net effect of the work-life balance is a workforce that is whole, healthy, and productive. In return, the holistic health of the employees leads to the holistic health of the organization.

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