The Good and the Bad
Laura Chase, an accountant with ABC Financial and an active member of the PTA at her children's school, has plenty of reasons to leave work in the middle of the day - parent-teacher conferences, sick children, PTA meetings. When Laura became employed with ABC Financial, she was ecstatic to discover that they had adopted a paid time off (PTO) bank program.
ABC Financial employs 15 people, some have children, others are taking classes to further their education and some have chronic medical problems. Whatever the issue, each employee's needs are different. With a PTO bank, all the reasons for sick, vacation and personal days are integrated into one stockpile, so no one has to figure out whether someone is really sick, and no one has to fib. PTO banks let employees use the time as they need it.
The PTO concept is nothing new. It has been tested all over the country during the past decade and a half with mixed results. Some companies report that they are pleased with the results and others are experiencing unanticipated downsides that affect both employee perception and company costs.
PTO Advantages
- Easily administered. The PTO bank can fold many different time-off programs together, making it easier for companies to administer and for employees to understand.
- Controlled absences. When leave types are separate, it is a tendency for employees to use sick time simply because they have it. A PTO bank causes employees to be more careful with the time they use, turning unscheduled absences into scheduled absences. Some companies using the PTO bank have found that the number of "illnesses" their company experiences drops dramatically.
- Recruitment and retention. Companies can develop increasingly competitive PTO programs as a recruitment and retention tool. Simply put, the better the PTO plan, the more attractive the company becomes to prospective employees.
- Flexibility. With a PTO bank, employees don't have to fit an absence into an employer's structure.
- Diversity. With fewer employees celebrating common holidays than in the past, a PTO bank reflects that an employer acknowledges the diversity of reasons for time off.
- Privacy. Employees don't really want to lie to their employer. A PTO allows them to take time off as they please, whether it is their child's play, a doctor appointment or simply a personal day off, without having to provide an explanation.
- Equity. Some employees in the status of "single" may feel their company favors those employees with children, with respect to needing time off from work. A PTO bank levels the playing field, allowing all employees access to time off for any reason.
PTO Disadvantages
- Losing "time". It is possible that some employees see a PTO bank as a takeaway. For example, if a traditional plan offers 10 sick days, employees might use all 10 sick days, even if they are not always sick, simply because they have them to use and feel entitled to do so. If a company builds only five sick days into their PTO bank, the employee who uses all 10 may feel cheated out of his or her days.
- Guaranteed use of time. Traditional programs using a sick time bank and a vacation bank can result in savings for an employer since not all employees use all of their sick time. The unused sick time accrues to the company's advantage in the form of fewer missed days from work. Installing and using a PTO bank encourages employees to use all the time in their PTO bank. As an illustration: A company converts its sick time allowance of 6 days and its vacation time allowance of 10 days into a single bank of 16 PTO days. If the company had experienced an average use of 50% of sick time by its employees, they may see a dramatic increase in the number of days out of work. If they have 100 employees and on average, each employee left 3 days in the sick time bank under the old system, the company could see as much as 300 additional days out of the office under a PTO system. For this reason, some companies, when converting to a PTO system, reduce the number of sick days placed into the PTO bank, as indicated above.
- Payment of PTO time upon termination. Although federal law does not require a company to pay accrued vacation upon termination, most companies do so. In contrast, most companies do not pay out unused sick time upon termination of employment. PTO systems generally result in payment of accrued PTO upon termination of employment. This means that what was formerly sick time is paid out to employees upon termination which results in a greater cost to the company.
- "My Company is Too Cheap to Pay for Sick Time." Use of a PTO system can inadvertently result in an employee's misperception of what constitutes their PTO bank. After a period of time, some employees see the PTO bank as strictly a vacation bank. They forget that sick time has been converted into the PTO bank. It is not uncommon to hear employees complain that the company is too cheap to pay for sick time.
