While conducting an analysis of one on my client’s benefit’s package, we were asked if we have you seen any trend toward Personal Time Off (PTO), combining vacation and sick leave into one combined benefit?
Here’s what we answered:
Yes. In fact, a survey conducted last year by WorldatWork, an association of human resources professionals to which we belong, shows that combined PTO programs grew by 43 percent from 2002 to 2010, while traditional programs declined by 24 percent during the same period. The vast majority of PTO programs combine vacation, sick and personal days, while continuing to offer separate programs for holidays, bereavement and jury duty.
Employers using PTO programs typically increase leave time in bands of two to five years as employees’ seniority increases:
- On average, a PTO system gives an employee with less than one year of service 15 days off, compared with eight vacation days and seven sick days under a traditional system.
- After one to two years of service, the PTO days increase to 19 compared with 12 vacation days and nine sick days.
- After five to six years of service, the numbers are 23 vs. 25, and after a decade of service the differential is 24 vs. 26.
Although a PTO system may provide employees with fewer total days of paid leave, it gives them more flexibility in how they use their time away from the office.
One commonly cited disadvantage to a combined PTO program becomes apparent when employees leave the company and the issue of paying for accrued but unused PTO surfaces. Employers generally (and some state laws mandate them to) pay out PTO days because they are considered an earned benefit. In contrast, sick days are not typically paid out under a traditional plan.
Upon implementing a PTO plan, employers often face the dilemma of how to handle the conversion of employees’ already accrued vacation and sick time, including what to do about accrual balances in excess of the new PTO program. This aspect of transitioning to a PTO program can have serious financial and employee relations implications for an employer.
- It is important for employers to evaluate how to handle existing vacation and sick accruals when transitioning to a PTO program.
- Employers should review their existing plans to ensure that they are competitive.
- Those who are considering transitioning to a PTO, should explore the options and conduct a cost benefit analysis first.
If you need assistance evaluating your benefit program, call Dacri & Associates.
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