PTO - What It Is and Is It Right For Your Business?

That’s odd you think, “Sick Leave Sue” has called in sick again and her illness coincidentally falls on a Friday - again. More and more you find yourself in the role of Sick Leave Police and you don’t like it. You want to make certain that your employees have some paid time off when they are ill but on the other hand you are finding more and more employees who view this time as an entitlement and use their available sick leave whether they are sick or not. You are wondering, is there a better way?

Paid Time Off, or PTO, provides an alternative to traditional leave programs that typically include separate time off banks for sick leave, vacation leave and personal leave. Companies of all sizes and industries are finding a number of advantages to adopting a PTO policy:

• Ease of Administration – PTO folds together multiple programs such as vacation leave, sick leave, and personal days into one program

• Control Over Absences – When sick leave is a stand alone plan, employees often use it because they have it, whether they are sick or not. With PTO, employers find that employees often save their time to use for vacation leave

• Recruitment and Retention – Employees like the flexibility of a PTO Plan

• Privacy – Employees don’t want to mislead their employers. With a PTO Plan employees can take time off to attend a PTA meeting or simply take a much needed day off without worrying about explaining where they are, and why they need the time off

• Equity – Employees without children often believe that employees with children are favored for time off. PTO banks help level the playing field

There are some downsides to consider when implementing a PTO Plan:

• Fear of Change – Time off is one of the highest valued benefits to employees – often second to pay, according to Carol Sladek with Hewitt Associates, so develop an effective communication strategy for the change

• Unhealthy Workers – Employees may come to work ill to save PTO for vacation use

• Increased Liability – All PTO is an accrued liability which means that all PTO must be paid out at termination. With a traditional leave plan policy only vacation leave must be paid out at termination

Keys to Success

• Survey – Before you take the plunge and switch to a PTO Plan, conduct an informal survey. Talk with a sampling of employees at all levels to weigh in on the idea. This also sends the message that employee involvement is important to the success of the company

• Communicate – The best way to ensure your transition to a PTO Plan will go well is to develop a communication strategy. I don’t mean simply write a memo to your employees, but rather develop an on-going plan for communication over time, and through various communication methods while anticipating questions you may encounter

• Plan – Have answers ready for the following questions: How will you handle the transition from the old plan to PTO? How will you determine the number of days to include in the PTO Plan? Will the change be effective in the next calendar year (most common)? Will you limit the number of PTO days that “roll over” each calendar year (this can be a good way to limit accrual liability)

Time to Switch?

If your sick leave program is healthy and working well, there may be no reason to switch to a PTO Plan. However, if you frequently find yourself in the role of Sick Leave Police then it might be time to consider a PTO Plan. Comments from employers at companies that have made the switch include “employees love it” and “everyone is happier.” Additionally, most firms that have transitioned to a PTO Plan, do not switch back to their former model. Maybe the time is right to explore a PTO Plan for your company.

References:

Article: “Employers increasingly willing to test the PTO waters” by Diane Cadrain, SHRM, August 1, 2005.