I Got the End of Year PTO Blues!

Did You Know?

  • Nearly one-fourth of U.S. companies offer no time off.
  • The average American worker receives 10 days of paid vacation per year. European countries, by contrast, mandate that employers offer at least 20 days a year. Some EU countries have even upped the requirement to 25 and 30 days.
  • Hourly workers are the exception, but there’s a catch. The bottom 25 percent of hourly workers only get an average of four paid vacation days a year, but the top 25 percent of hourly workers get 14 days.

One Bucket or Two?

  • The Case for PTO. A lot of companies have switched to this comprehensive system because, frankly, it’s simpler to track. No matter why your employee takes the day off, it comes out of the same bucket. Easy to manage, easy to track and simple for everyone to understand. The issue comes when people start coming to work sick because they want to have a longer vacation. This policy can seem like it’s rewarding the healthy employees and making life a little harder for those who need to use their sick days.
  • The Case for Two Buckets. While vacation and sick days in separate buckets might be tougher to manage, the system of “use it or lose it” may keep your employees happier and healthier in the long run. Companies tend to like the “use it or lose it” policy, while employees are less thrilled. However, paying out massive accrued PTO can create a serious cash cost that many companies cannot afford. The PTO banking liability increases with pay raises. But…

What’s Your Carryover?

  • Time left at the end of the employee anniversary year is banked and only usable when all current PTO was exhausted and the need for time off was due to a qualified leave reason, such as FMLA.
  • A total of 80 hours in our PTO bank and that’s used for both vacation and sick time. Employees can carry over all of it, but if they accumulate 80 total hours, they stop accumulating until they use some up. No one can ever have more than 80, so the hours are lost until they take time off.
  • Cap the rollover at 80–120 hours and cap the accruals at 2 years.
  • Allow employees to roll over 5 business days to the following year.
  • In industries where November and December are particularly busy, allow accrual to be used in January or February.
  • A modified use it or lose it policy. Employees can cash-out their vacation before their anniversary date (this helps avoid the year end payouts that can cripple smaller companies or those with very little cash on hand).
  • Allow a carryover of 24 hours or 3 days but it must be used by March 31.
  • You can avoid carryover if you set it up for a max accrual. Some PTO plans allow you to accrue up to 40 hrs more than max accrual and stops accruing until you reduce time in the bucket. Accrual is based on a rolling calendar rather than the annual cycle.
  • Employees need vacation. If they are having difficulty taking time to recharge, chances are it will impact your business negatively. Workers, on average, use only 54% of their eligible vacation time.
  • If you DO need to change your approach to vacation and sick time, remember to work with your employees. It’s a necessary benefit and any changes need to be communicated carefully.
  • Examine what you allow to rollover. If your employees want 5 days but you’re only allowing 3, consider if the level of dissatisfaction is worth 16 hours. Of employees who get paid time off, more than 90% have taken at least some of those days over the last 12 months, Glassdoor said, yet only 23% took all of the time they were entitled to.
  • Communicate effectively. If you DO have a use it or lose it policy or put restrictions on your accruals, make sure you use a system that reminds your employees when they need to use their time or when it might be in their best interest.

About Maren Hogan:

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Maren Hogan

Maren Hogan

Chief Marketing Brain of @RedBranch Media. I help folks in recruiting, talent acquisition and HR, figure out marketing, community and social. #TBEX #TChat