Article
Paid Time Off – Liberal, Conservative or Reformed?
Vacation time, which was once perceived by company owners as a “necessary evil”, has become an important recruiting and retention tool. Before we explain why, let’s take a moment to walk down memory lane.
Back in the 1940’s and 1950’s most employees were men since most women stayed at home with their families. Companies offered two or three weeks of vacation and many did not have Short Term disability policies, so the only way for an employee to get paid was to use “sick time”. As a result, companies had fairly liberal sick time policies.
Personal days became common as women entered the work force and occasionally needed time off for family events such as attending a school field trip. Companies recognized that most employees needed some time off for these types of activities, so they added one to three personal days.
Floating holidays became popular for two basic reasons. First, they allowed companies to remain open for business while giving employees a choice as to when to take a particular holiday. Secondly, they helped companies accommodate an employee’s desire to observe their own religious holidays.
Ok, so we understand how these types of Paid Time Off (PTO) plans developed. But are they the best plans for today’s employee? In most cases the answer is “NO”, but it does depend on the individual company. As a business owner or senior manager in a business, you need to ask yourself why you are offering PTO in the first place. What is the value to the organization? Are the PTO policies in line with the vision, mission and long term objectives of the organization?
Let’s be clear on the advantages of PTO to the employee. Paid time off gives employees a chance to rest and get physically, mentally and emotionally recharged with their work and their companies. It gives employees time to take care of personal issues and to heal from illness and injury. Plus, it allows employees to not be financially drained because of the need for some time off.
As mentioned earlier, American business culture has historically had a fairly conservative view of all types of PTO. But generations change and we now work in a very competitive, international business culture compared with that of our parents and grandparents.
Companies have the ability to change PTO from a “necessary evil” to a recruiting and retention tool. But first, they need to understand the wants and needs of their workforce. Employee surveys and exit interviews have revealed several common threads, particularly with employees that can be categorized as belonging to “Generation X or Y”.
- Actual vacation time is valued.
- Personal days are valued for the many differences between cultures, sexes, age groups, etc.
- Sick time is not valued as much because these employees do not get sick as often and can rely on Short term Disability and Long Term Disability policies.
- Floating holidays are popular because it gives “freedom of choice” when determining when to observe a holiday.
A common solution many companies are using today to make their paid time off policies more up to date with the current needs of their employees is to offer what is generally termed “PTO plans”. These plans combine vacation, sick time, personal days and floating holidays into one type of paid time off plan.
This solution has many advantages:
- Employees have more choice as to when and how to use their PTO. They don’t have to use vacation time for vacations and sick time for when they are sick.
- Employees who value vacation time like these plans because they recognize that if they do not get sick, they have more time for vacation.
- Employees who generally get sick more frequently are not harmed by this type of plan.
- Companies that have a very diverse employee culture with various religious backgrounds represented can be supportive by allowing the individual to decide when to take time off for a holiday.
- Employees do not “surprise” managers as frequently by calling in “sick” just to get an extra day off.
- Companies can use PTO plans as recruiting and retention tools. 18 PTO days (which equates to 10 vacation, 5 sick, and 3 personal days) sounds more appealing to a prospective employee than two weeks of vacation. Although PTO plans are rarely the “primary reason” that employees stay with employers, these plans often enhance employee morale and company loyalty.
- PTO plans can really give more time off for activities such as that well-deserved vacation without actually accruing any more time!
On the flip side, there are some negatives to PTO plans:
- CFO’s and other financial analysts will tell you that employees actually use more PTO when designed this way than when broken up as vacation, sick etc. They tend to use it all!
- Some managers will say they have more trouble planning work schedules because MOST employees try and save PTO for vacation.
Positive Course of Action:
Ultimately, your goal is to attract and retain the best talent so that you can meet your business objectives and continue to grow and succeed. Take action now by completing the following in 2010:
- Conduct an employee survey to evaluate your employees’ wants and needs as they relate to PTO.
- Conduct a survey of your managers to ask them for their opinions as to whether a change in PTO policies will be beneficial or not.
- Gather data from exit interviews to help determine if your company’s PTO policies have contributed to employees leaving your business voluntarily.
- Develop a PTO plan to meet the needs of your company as well as your employees.
Finally, continue to assess your needs on an annual basis and revise and enhance your PTO plan so that you will continue to be an employer of choice.
