May 5, 2016

The power of paid time off

by Jim Annis

Unlimited paid time off, or PTO, has almost reached superhero status in the media, showcased by startups and giants like GE and Adobe. This permissive approach to time off has burst forth from the phone booth with a super cape, promising that if employees are getting their work done and have received approval, they can take time off when they want and need to.

Is unlimited PTO realistic?

It is if your work culture allows it, which means looking at the staff holistically. Some employers will never allow employees to take PTO. They believe in the concept itself, and use it for recruiting purposes, yet when an employee uses the time, it is irritating or miserable for the employee to come back to the job. Still yet, some employers reward employees that never take PTO, enforcing a culture of no time off … even if it is available.

One-size-fits all, use-it-or-lose-it two-bucket policies are dead. Companies that make people wait a year before they take PTO are outdated and not competitive. Candidates are negotiating their time off as part of their employment package. Millennial job seekers in particular look favorably on unlimited days versus the 15 days most U.S. companies provide. After recruitment, employers with time off benefits see greater loyalty and retention. Pros of unlimited PTO include no accrued expense (and related balance sheet liability) for banked time, no end-of-year rush to take unused vacation days that do not carry over and employee ownership over their own time.

How to manage unlimited PTO

Change your time card mentality. Shift your focus to productivity per hours worked. Call “unlimited PTO” by a different name, then relate it specifically to your culture. Pay attention to how managers and employees use it. Create policies and procedures that easily allow everyone to communicate time off and approval. Define the minimum time off required. Internal communication about accrued time banks and how or if those will be paid out upon implementation of the new policy is critical to trust and success of the new program. And if you are really worried about time-off abuse, remember, in almost all cases there are also performance issues. Rarely is time off abused by a stellar employee.

What are our current levels of PTO?

Well, we don’t offer unlimited … yet. We switched from two weeks’ vacation after the first year and six days of sick to a total of four weeks of PTO in the first year, plus 40 hours of paid volunteer time in the second year and no restriction on reasons for taking PTO. We always talk about the blending of work and non-work, yet they are still partially separate. Whatever people go and do during that time makes them a more interesting employee, even if they have a “stay-cation.” We have noted a bump up in creativity and innovation that benefits us all.

Here’s the rub. Research shows offering unlimited PTO didn’t result in more time off taken (either the same time was taken or less). So why do employee surveys show that it is valued so highly? Perhaps the answer lies not in what unlimited vacation actually does, but for what it “says” to our minds.

Think of the coolest superhero powers – leaping buildings in a single bound, millisecond healing powers and unbelievable memory. Superheroes capture the blithe spirit of young and old alike. Their “existence” allow us to imagine how different life would be if we developed superpowers of our own. Unlimited PTO allows our minds that same freedom of thought, giving us permission to envision the possibilities and some hope for stress relief from the day to day.

What would you do with unlimited PTO? Go there. If it is something that you value, find a company who offers it – then use it.

Jim Annis is president/CEO of The Applied Companies, which provide HR solutions for today’s workplace. Celeste Johnson, Applied’s COO, contributed to this article. 

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