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A paid time off policy can attract workers. Does your business have the right policy?

By July 23, 2019No Comments

(This post originally appeared on

Paid time off for vacation, sickness, or family leave is among the most requested employee benefits. But not enough employers are getting the message.

That was the conclusion of a 2018 study of more than 1,000 employees nationwide conducted by T-Sheets, a subsidiary of accounting software maker Intuit. The survey founded that although three-quarters of American workers say it’s very important for employers to provide paid vacation, sick time, or holidays, almost a third of companies (31 percent) don’t provide paid time off at all.

How does your small business compare?

The problem has become significant enough that governments are stepping in. Many states and cities are requiring employers to provide mandatory time off for sick employees or those needing family leave.

Currently, neither Delaware nor Pennsylvania requires this of employers (although legislation is proposed in Pennsylvania). The City of Philadelphia requires its employers to provide one hour of sick time for employees for every 40 hours they work, to a maximum of 40 hours annually. New Jersey requires employers to provide one hour for every 30 hours worked, up to 40 hours of time per year.

“We are seeing states propose — and, in some cases, pass — comprehensive paid family and medical leave,” says Mike Trabold, director of compliance risk and human resources at payroll processing firm Paychex. “We are also watching an emerging trend: providing paid leave to eligible employees in which employees may use the leave for any reason — much like they would vacation/PTO. Nevada and Maine have both passed legislation this year, and New York City is considering similar legislation.”

Federal paid parental leave has also been a part of President Donald Trump’s last two proposed budgets, but the legislation has failed to gain congressional approval.

Government mandates aside, smart business owners and managers know that a good paid time off policy will not only help attract great employees but will keep current workers happy. And in these times of low unemployment, such a benefit can make a big difference.

So what’s the best vacation policy for your business? There are really only three choices.

You can offer a standard two-, three-, or four-week vacation plan, where employees earn their vacation based on years of service, and are also able to take advantage of a separate number of sick days each year. Or you can provide a more flexible policy, where you give your employees a set number of days off per year (again, based on years of service), which they can use any way they’d like.

Third, some employers – particularly large companies like GE and accounting firm Grant Thornton, as well as tech firms like Twitter and LinkedIn – have offered unlimited vacation benefits where as long as the job gets done, employees can take as much time off in a year as they want. This may be working for them, but it isn’t for everyone.

“Unlimited paid time off simply isn’t an option for our small business,” says Michele E. Gehring, a principal at King of Prussia-based Coterie Environmental. “We need to be able to count on every member of that team to be present on a routine basis. Something like unlimited PTO would create strain on resource availability.”

All of these policies have their pros and cons. But a study released last week from human resources professional organization WorldatWork found that some trends are emerging.

According to this study, which looked at more than 500 employees, 63 percent of organizations that offer flexible PTO plans also allow their employees to make immediate use of the benefits as opposed to earning the days off over a period of time. Another interesting trend: one in four employers in the study allowed employees to redirect unused paid time off to other employees in the company or their retirement plans, or for a charitable donation. And although more than a third (37 percent) of employees don’t use all of their paid time off in a year, the study found that organizations with “use it or lose it” policies have been able to reduce that number to 19 percent.

Consistency and fairness in implementing a PTO policy is also critical. Paychex, according to Trabold, “strongly encourages” clients to set expectations with their employees in advance — especially around the acceptable use of PTO and the approval process — and to implement it as consistently as possible to mitigate claims of discrimination.

Having the right paid time off policy (and requiring your employees to use it) isn’t just an important recruiting tool. It’s a critical part of making sure your people are happy, healthy, and rested enough to do the best job for you.

“Burnout is a real challenge for business and makes people so much less effective at their jobs,” says Brittany Reed, owner of Tesoro Leather Studio in Philadelphia. “We all should take more time away from our jobs when possible. We don’t live to work; we work to live.”

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