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Loosening the PTO Rules

Although the idea of allowing employees more control over their paid-time-off has been around for years, only a handful of companies are actually letting their workers buy, sell and trade vacation time.

Wednesday, July 3, 2013
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With all the rhetoric around the benefits of establishing more flexible-work arrangements for employees, it's somewhat surprising that the number of companies taking creative approaches to workers' paid vacation time is as low as it is.

The recently released 2013 Employee Benefits Research Report from the Society for Human Resource Management puts the number of employers currently letting employees exchange unused vacation days for money at 9 percent.

The survey of 518 randomly selected HR professionals also finds only 5 percent allow employees to buy more vacation time through payroll deductions and only 7 percent allow them to donate unused vacation days to a companywide kitty or to specific individuals.

What's more, those figures don't seem to be trending up or down. "We haven't really seen much of a change over the last two to three years," says Alex Alonso, SHRM's vice president for research.

There also doesn't seem to be any "distinguishable difference industry to industry," he says, beyond the fact that the professional-services sector offers a bit more leeway than, say, the manufacturing sector -- except in cases where unionized shops leverage more power over management.

What Alonso does see are "employers looking for ways to enhance their employer-value propositions," he says, which raises the question: Why not? Why don't employers give their workers more free rein in deciding how much vacation to use and how to secure the time they need for what they want to do?

"If I'm an employer, I'm looking at this as a way to distinguish myself from my competitor," says Alonso. "Two areas where we see benefits being leveraged the most, according to the survey, are in the areas of attracting and retaining top talent, and this would be something that top talent would find especially attractive," but few employers are going the PTO-buy-and-barter route.

One reason may be that the administration of such a program seems too complicated and the return-on-investment "may not seem equivalent to the work and time that goes into administrating [it]," he says.

Indeed, any employer considering this allowance does need to be aware of what benefits consultant, speaker and writer Carol Harnett calls the "twists and tricks" involved.

For one, letting people purchase and then accumulate unlimited PTO could become something an employer would actually have to budget for.

"Think about it," says Harnett, HREOnline®'s benefits columnist, "employees could say, 'I have accumulated four weeks' vacation time; I want to take the summer off.' There's liability in general when people are taking whole months off, plus you don't want that accounting nightmare.

"My recommendation," she says, "is to not let people carry over more than five to eight vacation days" year to year.

Some companies venturing into this PTO-buying-and-selling arena are stipulating that, when it comes to selling back any unused vacation time, employees must use all of their accumulated PTO first before they can be reimbursed for the vacation they purchased. "Some employees may become resentful that others who didn't buy extra vacation time can still carry over their PTO," says Harnett.

Employers also need to start the process with a long, hard look at their cultures and whether establishing flexible PTO policies will really work in their environments, she says. Good candidates are companies that operate in goals-oriented, or results-only, work environments.

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"There's a psychological lift" to having more flexibility with PTO, Harnett says, "but you have to be in a ROWE environment, because what you're really saying to people is, 'We go from project to project ... so when the project is done and before the next one begins, go take some time off.' "

She, herself, works best that way. "If I ever go back to the corporate world, my first point of negotiation," Harnett says, "is my vacation; because of the work I do, I could easily get burned out." In fact, in her work experience, she's had to impress upon an employer or two the importance of time off. "I tell them, 'You do not want me burned out.' "

Harnett agrees with Alonso that relaxing restrictions on PTO carries some power in attracting and retaining top talent. "This does change the conversation during onboarding time," Harnett says. "Exempt employees and executives will be more aggressive in negotiating their PTO. It becomes a much bigger negotiating factor."

Will it ever become common practice, though, and not just a practice of a few?

Without assigning any time frame, Harnett does think more employers "are starting to consider absence and its impact" on an organization in a still-challenging business environment. "Most CEOs still can't tell you how many people are at work or not at work on any given day," she says, but that's changing as employee absence takes on more bottom-line importance "and vacation falls into that bucket of people at work versus not at work."

Better they show their employees a vote of confidence in managing more of their own time off, or they might go the way of one employer Harnett knows of, where employees, "finding they didn't have a very generous PTO policy, just called in sick."

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