According to the Society for Human Resource Management’s annual benefits survey, about two-thirds of U.S. employers now offer paid-time-off (PTO) programs. Typically a PTO plan lumps all paid days into one "bank," allowing the employee time off for a wide variety of reasons.
Like traditional vacation policies, employees generally must get prior approval for time off, and employers reserve the right to deny or reschedule leave for business needs.
Unlike traditional programs, employees in a PTO no longer have limits for each type of paid time off. Instead, employees have more freedom and flexibility in choosing how they use their allotted time off. For example, instead of having 10 vacations days, five sick days and three personal days, an employee would typically have 18 PTO days to use for any reason.
The PTO bank is a relatively new trend in the United States, but commonly used by clients utilizing a professional employer organization (PEO). The professional employer organization will help a company develop a program that suits the client’s individual needs and fits the company’s culture.
Employees enjoy the flexibility and control they gain from a PTO program. They are not limited to particular reasons for taking time away from work and are allowed greater privacy because their absence no longer has to be classified for record-keeping purposes.
In addition, these benefits are fair and equitable to all employees.
PTO plans are easy to implement and reduce the cost of administration due to their simplicity.
Most employers experience reduced absenteeism and higher morale while requiring the employees to become more responsible for managing their time.
In addition, lower absenteeism directly benefits the bottom line. Unscheduled absences are reduced, and management is given more lead time in planning for scheduled leaves, allowing for better control over project management and scheduling.
PTO plans do have some disadvantages.
First, employees must be responsible for using their PTO wisely. The distinction between sick days and vacation days are blurred, and employees might view the PTO as extra vacation and not set aside enough time for illnesses that might arise.
Second, since employees don’t have to explain why they need time off, it may be difficult for employers to track the appropriate use of the Family and Medical Leave Act (FMLA).
A company’s PEO should have the ability to manage and track the availability of FMLA leave, avoiding any unforeseen liabilities.
Finally, the employer will need to have a policy in place to handle unused PTO left over at the end of the year or at termination.
Is a PTO bank right for your company? Consider these factors:
¥ Analyze absenteeism patterns and costs. Are your employees absent for reasons not covered by your separate vacation or sick leave policies? Are they being forced to take unscheduled days off because they have personal issues to handle?
¥ Consider your company culture. What are the attitudes and culture of your organization? Are you willing to give your employees more flexibility and control of their time off? Will your supervisory staff be receptive?
¥ Tracking FMLA leave. Do you feel confident that you can manage your responsibilities with regards to FMLA leaves? Will you be able to put processes in place to monitor absences, communicate options for employees and successfully track the use of leave?
¥ Review State laws. Wisconsin allows for the payout of PTO upon termination, but does not make it mandatory. You should have a standard policy in place that is compliant.
If you decide to switch to a PTO bank, determine how many days you will be allowing yearly and whether you will be awarding PTO to part-time employees.
Be sure to award at least as many PTO days as you have currently, remembering that you will likely be reducing the number of unscheduled absences.
Decide up front if you will allow carry over at the end of the year and payout upon termination.
Finally, consider how the change will be perceived by your employees and plan accordingly.
For more information on the PEO industry, visit the NAPEO Web site at www.napeo.org.
Laurie L Stueber, SPHR, is president of Stueber Consulting LLC, a professional employer organization based in West Bend. She can be reached at (262) 306-8923.
September 17, 2004, Small Business Times, Milwaukee, WI
