Paid time Off: Considering Your Firm´s Options
In the past year a topic that has been raised by many firms that we work with is that of paid time off or PTO. Many firms are wondering if a traditional leave program that they have offered for many years is the best fit for their firms now, or maybe they should consider a policy providing a PTO bank.
Most traditional leave programs include a vacation leave bank, a sick leave bank and perhaps the occasional personal day or floating holiday. A typical PTO program usually provides an aggregate of vacation plus sick leave accrual and any personal days and floating holidays, creating one leave bank. Many firms move to a PTO program to help control unscheduled absenteeism. In most traditional sick leave programs, the employee accrues leave but the leave usually doesn´t carry the same advantages of vacation accrual and is not "paid out" should the employee leave the company. Knowing this, some employees may abuse sick leave by using it when they are not sick, resulting in higher unplanned absenteeism. With one pooled bank of leave, employees are more likely to save the time for "scheduled" days away from the firm.
Why it is a good for the firm
One advantage to PTO is it will make your firm more attractive to prospective employees and make it easier to retain current employees by increasing the number of days at their disposal that they can take off from work and still get paid. Since most employees are healthy and don't ever use all their sick leave, why not let them take the difference as extra vacation time. Your firm will reap happier employees and the cost is minimal to the firm. Staff who are healthy and who have healthy families love PTO because they can take some of the days that were formerly classified as sick days as vacation.
A majority of employees view paid time off as one of the more important benefits an employer can offer. PTO programs allow for more flexibility in time off. They also afford employees more privacy about their reasons for taking a day off. Employees may need the day to care for children, wait for the delivery of an appliance or simply to preserve their mental health. With the PTO plan, employees are free to take the day without making up an excuse, and the employer has fewer leave abuse problems to police.
Another advantage is that most employers will tie PTO into their disability benefits. They'll allow the staff to carry over enough PTO days to get through the deductible period before short-term disability coverage begins. But looking at this situation the other way, a month-long illness could kill your plan for a two-week vacation by forcing you to use 10 or more PTO days for sick time before your short-term disability benefits kick in, and that leads us to looking at a few of the challenges that come with PTO.
What are the challenges of PTO for the firm?
A Paid Time Off (PTO) program can invite abuse. Since a company no longer knows why an employee takes time off, and officially doesn't care why, employees are gone more frequently. While this can be controlled somewhat by requiring prior approval for any PTO, employees who never used their full allotment of sick leave will definitely use all of their PTO every year.
One of the most costly abuses of PTO is sick employee´s not using sick leave. Many employees begin to view all paid time off (PTO) as vacation time. So when they are sick, they don't want to spend any of their "vacation" time so they come to work and spread germs. This makes other workers ill and productivity drops as more and more of the work force gets sick.
PTO plans have at least one major minus for workers: Employers converting a traditional time-off plan to a PTO plan usually don't give workers the full sum of the previous accrual rates for vacation, personal and sick days; they curb the high cost of time off by shaving some days off the grand total. For example, a worker who received 15 vacation days, three personal days and six sick days under a traditional plan might receive only 20 paid days off under a PTO plan to cover all these contingencies.
What you should do to manage the PTO issue
Paid Time Off (PTO) can be a powerful recruiting and retention tool. It can also lead to abuse. As you consider your firm´s options in potentially implementing this benefit you should:
- Make sure it suits the firm culture
A PTO plan works best in a firm with a higher degree of flexibility. - Establish clear guidelines in advance
If you require employees requesting PTO in advance except for emergencies, how will you define emergency? Is waking up Monday morning with a bad hangover an emergency? What about a sick child, an attitude-adjustment day, or a problem with the car? How will you define and enforce "emergency?" - Manage the people, not just the PTO
If an employee is sick they should stay home. If they come to work sick, send them home. You have an obligation to protect the rest of your employees from one who is contagious.