Is It Time to Adjust Your PTO Policy?

Key Podcast Highlights

• PTO Usage Trending Down: A survey by Sorbet revealed that 62% of Americans didn’t use their paid time off (PTO) in 2023, which was a 57% increase from the prior year. Additionally, 5.5% of American workers didn’t use any PTO in 2023.
• Traditional PTO Policies: Common PTO policies include “use it or lose it” plans, where unused PTO will either expire or carry over to the next year. In recent years, these policies are actually becoming less favored due to their complexity and administrative burden.
• Growing Popularity of Unlimited PTO Policies: More companies are adopting an “unlimited PTO” policy, also known as “professional judgement PTO” plans. These policies allow your employees to take as much time off as they need, with supervisor approval, promoting flexibility and trust.
• PTO as a Retention and Recruitment Tool: Professional judgement PTO plans are often offered to employees who have been with the company for a certain amount of time (e.g. five years). This approach to the policy could help retain your experienced employees and attract new talent.
• Mental Health and Internal Control: Ensuring your employees are taking the time off they need is crucial for their mental health and maintaining internal controls, especially for your company’s financial roles. Supervisors should encourage their direct reports to take at least a couple weeks of time off each year to prevent burn out and promote work-life balance.

Transcript

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Gene (00:02):

Hey everybody, it’s Gene Marks and welcome to this week’s episode of The Hartford’s Small Biz Ahead Podcast. Thank you so much for joining me. I want to talk to you this week about pay time off programs. And it comes from a survey that just came out from a FinTech company called Sorbet. They found that 62% of Americans didn’t use all of their PTO in 2023, which was up from 57% from the year before. It also found that almost 6%, five and a half percent of American workers did not take any PTO in 2023, which is really crazy stuff. It was based on 1500 employees. So this wasn’t like some small survey. It was a serious thing. So a little bit about paid time off and what you should be offering and I want to talk about what some of the offers are.

Gene (00:53):

I spoke recently to a client who all, and by the way, let me give you some ideas. I mean, there’s, there’s the usual use it or lose it policy that you can have where you offer three weeks of PTO and maybe some sick days, and then you track it, and then at the end of the day, uh, whatever you don’t use, you either lose it or maybe it carries over to the next year. Doing that kind of stuff, it’s complicated. It takes administrative time. It is pretty standard. A lot of companies do it, but it is just, again, it’s something that I feel is, is going to be a thing of the past. And here’s the reason why. The top three benefits that employers are offering.

Gene (01:37):

Now, when you look at most HR surveys, it’s obviously healthcare is huge, retirement is huge. Number three is flexibility. People really want flexibility. And I mentioned earlier, just before I started talking about how I was recently speaking to a client of mine, this client, they run like a biotechnology company in New Jersey and they offer unlimited paid time off, unlimited paid time off. And I’m seeing a growing number of companies offering a unlimited paid time off. Now, there’s a new terminology for unlimited paid time off. You don’t call it unlimited PTO anymore because there’s, I don’t know, some people have a bad connection to it or they roll their eyes on it or whatever. This company calls their unlimited PTO policy, a professional judgment PTO policy, professional judgment. It’s pretty much the same thing. And here’s how it works at this company. Okay? You work for this company and the rule is you can take as much time off as you want. Now, let me back up a little bit. They have another PTO plan for their workers, and that’s a use it or lose it plan, where workers get two to three weeks off a year, depending on their seniority, or their where they are, their title and their job position, as well as sick days.

Gene (02:58):

However, they have this professional judgment PTO plan available for employees that have been with the company for five years. So it’s a seniority thing. It’s a retainage thing. They say to their employees, Hey, you’re with us for five years. You are then eligible for our professional time off program. Now, that not only gives incentive for employees to stick around at this company, but also it gives the employers the ability to get to know the employee. I mean, you have somebody work for you for five years, you feel a little bit more trusting that you can, you can give them the professional judgment to take time off when they need. And how does that work? Well, their professional judgment policy is that their employees can take whatever time off whenever they want. But it has to be approved by their supervisor.

Gene (03:47):

So if an employee says, I want to take a month off so I can travel to Australia , or I need to take a few weeks off because I’ve got to be home with a sick parent, or I have a, and by the way, this is different than parental leave. That’s, let’s leave that aside, but let’s just say I have certain at-home or personal issues and I need to take a couple of weeks off. As long as the supervisor can handle it, as long as the supervisor approves it. And as long as the supervisor feels confident and comfortable that the employee can still get their job done, then good for them. They allow them to do it. The owners of the company are like, you know what? We don’t want to track people’s time off. We don’t want to be like looking over their shoulder.

Gene (04:27):

We don’t have to be big brother. We don’t have to be micromanaging them. Our employees are grownups, they’re adults. We give them jobs to do with job responsibilities. And it’s up to them to meet what their responsibilities are. And for my client, they’re like, we don’t really care when or how, or getting this done as long as they get their jobs done. And if they’re supervisors are fine with them taking time off whenever they want or however much their time, as long as they’re getting their job done, that’s fine by us. And this policy has been enormously successful for this company. Now, by the way, they started it during COVID because there was a lot of work from home stuff going on. But they just expanded it and they’re doubling down on it. And they’re saying that it’s just given their employees the freedom, the respect, the dignity, of being allowed to do their jobs as they see fit.

Gene (05:18):

It’s become a great retainage tool because now employees want to stick around for even longer. And plus it’s also a, um, a good recruitment tool as well. Now, there is one caveat to this that, that I want to make sure that we’re said. And this gets back to when I started this podcast about the survey that this company did, where they said that 62% of Americas didn’t use all of their PTO in 2023. One of the things that we struggle with is this. It, it’s FOMO. You’ve got some employees that are like, “Oh geez, I don’t know if I should be taking this time off. I don’t want to be out of the office. I don’t want to be missing out on what’s going on. It might hurt my forward career.”

Gene (05:56):

And some surveys have shown that people are just taking less time off than what they were doing even under a “use it or lose it” policy. And I think we have to be really aware of that, which means that when we speak to our employees, even if we have a professional judgment plan of an unlimited paid time off plan, supervisors need to be checking in with their employees and making sure they’re taking at least a couple weeks off a year. It’s really, really important for people to take time off. When I read that 5.5% of American workers did not take any PTO in, in 2023, not only is that a mental health issue, which I think impacts both employees and their employers, it could be an internal control issue. I get nervous when people don’t take time off, particularly people in the financial area of a company.

Gene (06:42):

They should be taking time off and letting other people step in and do their jobs for them just from an internal control perspective. So, if you do have a professional judgment or an unlimited time off policy, I really think that you need to make sure that your employees are taking advantage of it and taking time off. Just because somebody doesn’t take any time off doesn’t mean that they’re a hard or a great worker. Everybody needs balance in their lives. So let me give you a few takeaways from this little conversation. Okay? 62% of Americans didn’t use all of their PTO in 2023, which was significantly up. And five and a half percent of American workers didn’t take any PTO at all in 2023. That’s not good for our businesses. We need to be more flexible. Remember that flexibility is among the top three benefits now that employers can offer.

Gene (07:28):

And we need to offer flexible PTO plans. My advice, because I’ve seen some clients really do this successfully, consider a professional judgment PTO plan. It’s like an unlimited PTO plan, but make your employees have to serve some time before they can be eligible three years, five years. Make it up to a supervisor’s approval before they’re allowed to take that time off and then keep an eye on them and make sure they’re using it, and taking time off just from their mental health and an internal control perspective. Flexibility is important. Let’s leave it up to employees to do what they want to do. Take the time off that they need for whatever reason they want, as long as they’re getting their job done. Let’s give them the respect and the dignity they deserve. They can choose when they want to take time off or not, and we can let their supervisors keep an eye on them to make sure they’re not abusing the policy, which come on, 99% of people won’t abuse that policy. My name is Gene Marks and that is all about paid time off in this week’s Hartford Small Biz Ahead podcast. Thank you so much for listening. If you need any advice or tips or help in running your business, join us at smallbizahead.com or sba.thehartford.com. You can get all that including prior episodes of this podcast. Hope you got some good information from this advice. I’ll be back to you next week with some more advice to help you run your business. We will see you then. Take care.

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