Written by Christine Walters
Forty years ago, most employers that offered paid leave did so via two banks: one for sick leave and one for vacation. In the 1990’s, merging the two banks into one Paid Time Off or PTO bank began trending. Why?
For employees, PTO banks provide more flexibility than separate paid leave banks. An employee does not need to fake a sick day to access earned, paid leave. That became so widely recognized the practice was AKA taking a “mental health day.” Today, that has a whole, new meaning.
For employers, there is a potential fiscal savings. Research shows that most employees do not use 100% of their sick and vacation banks each year. This year, Zippia, Inc. reported that 55% of U.S. workers did not use all their PTO. In 2018, they left on the table an average of 6.5 unused PTO days or 27.2% of the time their employer offered. As a result, an employer can offer fewer PTO days; employees can still utilize the same amount as they have in the past; and less time is left in the employer’s accounts payable column.
More recently, some employers have reverted to separate sick and vacation banks. Federal executive orders, state, and local laws, including Maryland’s Healthy Working Families Act and Montgomery County’s Earned Sick and Safe Leave, have mandated paid sick leave for most employees. The laws dictate how much, when, how, for whom paid sick leave must be administered, including detailed recordkeeping restrictions and requirements. When sick leave is combined with vacation in a PTO bank, that tracking can become muddied, at best.
If you are thinking of moving to a PTO program, here are some considerations (in addition to any applicable federal/state/local leave requirements).
- Which employees will be eligible?
- Will employees accrue the paid leave or will you front-end load it?
- If it accrues, when will accrual start?
- When will you permit a newly hired employee to begin using paid leave?
- How much, if any, will roll over from year to year?
- What cap or maximum will you place on total accrual, if any?
- How much earned, unused paid leave will you pay out upon separation from employment, if any, and under what conditions?
Next Steps? Here are a few more considerations. Use the information you derive from this research to decide your best, next step.
- Utilization review. What are your current utilization rates for paid leave? Are any trends tied to seasons, location, department, or other factors?
- Benchmarks. What are other employers in your industry offering? Do some benchmarking through your professional, industry or trade association. Then decide if you want to lead, lag, or match the market.
- Survey your employees. Which of your current paid leave benefits do they like most? Least? What would they like you to add?
Use that information as a recruiting and retention tool. Let them know they spoke, and you listened!
