Some Thoughts about Re-Vamping Paid-Time-Off Policies

I remember once seeing a bumper sticker that read, “OH NO! NOT ANOTHER LEARNING OPPORTUNITY!” I sometimes feel that way as we emerge into the changes in our economy that the pandemic has brought.

One of those changes, which was probably already underway before March 2020 but less obvious in its effects, has turned out to be how companies recruit and compensate employees. I’m going to take a look at just one piece of that effort: paid time off (PTO) policies and practices.

I’m old enough to remember when the major consideration my generation took into account, in considering a job offer, was the monetary compensation. But that’s changed, and not only for younger generations but also for just about everyone. We’re all much more aware of work/life balance, of participating in community life, of having a positive impact on society in our work, and the present economic re-set is providing companies with the opportunity (OH NO!) to think creatively about how to appeal to those demands in their prospective employees.

Paid-time-off policies are one way to structure a compensation package that appeals to all generations. In fact, there are so many creative ways to re-structure PTO policies that I’m going to present just five of them here, so that this doesn’t turn into the blog that never ends!

1. Historic PTO policies based on job tenure need to reflect new realities: The days when an employee stayed with the same company for many years is gone. Most employees now stay in the same job 18-36 months, so PTO based on tenure are not incentivizing for them. Many companies are moving to a PTO policy that gives the employee PTO from day one in an effort to show the prospective employee that the employee matters just as much as the bottom line.

2. “Use it or lose it/roll it over” can be changed to “Use it or ‘pay it out’ ”: Many HR departments are discovering that employees are leaving unused time off on the table each year. There are many reasons why employees do not use their time off: for example, the employee may not want to play “catch up” when he or she returns to work. Or the employee may save time off to use when the children are sick, only to get to the end of the year when it’s too late to use all the saved time. Or the employee may not be able to travel and doesn’t want to use paid time off to do nothing. Some companies have found that employees prefer to be paid back for unused PTO at the end of the year, rather than continuing to accumulate time off that they don’t use.

3. Add a floating holiday to the policy standard holidays: One way of giving the employee an additional day off is to add a “floating holiday” to the list of paid holidays that do not count against PTO. The floating holiday can be used by the employee, with advance approval, when the employee wants, perhaps for a birthday, a religious holiday not included in the standard holidays, or just a Tuesday to catch up on favorite streaming movies.

4. Combine separate time off banks for vacation or sick pay (if allowed by your state laws): By putting all the employee’s time off in to one PTO bank means that the employee doesn’t have to be concerned about “proving” illness when he or she uses sick time, or feel guilty when he or she uses sick time to care for a child. Establishing one bank for each employee lets the employee keep track of how many hours/days he or she has used, rather than trying to keep track of how each chunk of time taken off is charged.

5. Switch to an unlimited time off policy: Some tech companies have started switching to an unlimited time off policy. That’s right: unlimited paid time off. Obviously there must be ground rules that enforce this policy, such as a requirement that the requested time off must be pre-approved, and/or that the employee must complete a specified number of hours of work each month/quarter, and that any projects or deliverables that others in the company rely on for their work are completed or on schedule. This ultimate flexible PTO policy shows promise for increasing productivity and building loyalty and, not incidentally, decreasing turnover.

Not all of these PTO policies will work for all companies or for all positions within a company, but they certainly have made me think more creatively about the issue, and I hope they do the same for you.