Your Company May Benefit from a PTO Bank

WorldatWork, the HR professional society, has been surveying its members for over a decade on this topic. In its most recent “Paid Time off Programs and Practices” report, within some demographic groups, a majority of employers now merge those paid time off (PTO) components. That creates a “combined bucket of available days to be used by employees … at their own discretion.” One benefit of this approach is that employers are no longer put in a position to have to judge whether leave is used appropriately.

Specifically, 51% of privately held companies have jumped on the PTO bank train. In the health care and “social assistance” industry sector, 79% of those surveyed have embraced this plan. In contrast, just over one-third of manufacturers are using PTO banks, so far.

Use of PTO banks also varies considerably by employer size. Here’s an overview.

  • Among employers having fewer than 100 workers, about 59% use PTO banks.
  • For employers in general, about half use PTO banks. This takes in all sizes of companies, except one.
  • In that one category, defined as 10,000 to 19,000 employees, more than two-thirds use PTO banks.

Growing Prevalence

Overall the choice to use this method of distributing paid time off is growing. A decade ago, only one in three companies used it, while today the overall figure is 43%. Of those surveyed more than one in four are at least considering a move to this system.

Here are the primary motivations for the employers that have already made the switch, and how frequently they were identified, according to the survey:

  1. Greater flexibility for employees (63%),
  2. Ease of administration (55%),
  3. The ability to stay competitive with other companies (29%),
  4. Reduced absenteeism (23%),
  5. Improved employee morale (22%), and
  6. Increased cost effectiveness (20%).

Although reducing absenteeism ranked fourth on that list, it’s noteworthy that 41% of survey respondents reported reduced absenteeism after a PTO program was adopted. That led researchers to believe the drop in absenteeism might be most dramatic right after the program was implemented.

Also noteworthy in the survey is the fact that employers using PTO banks, on average, give employees fewer total paid days off, than those that set individual limits for vacation, sick leave and personal days. As with traditional vacation policies, PTO bank policies allow more paid days off as employee tenure increases. The accompanying table tells the story.

Average Number of Days Off by Paid Time Off Policy Traditional PTO Bank
< 1 year of service 20 16
1-2 years of service 23 17
3-4 years of service 24 18
5-6 years of service 28 22
7-8 years of service 28 22
9-10 years of service 29 23
11-15 years of service 32 25
16-19 years of service 34 26
20+ years of service 37 27
Source: 2016 WorldatWork Paid Time Off Programs and Practices Survey

Few employers vary their paid time off policies by employee rank, job classification, worksite or department.

Additional PTO Uses

A handful of employers with PTO bank policies expect workers to use their PTO allotments for certain purposes beyond vacation, personal days and sick days. Examples include:

  • Generally recognized federal and state holidays
  • Bereavement
  • Jury duty

On the other hand, a large number of companies that use PTO banks expect employees to use their paid time off hours for parental leave and to do volunteer or community work.

Nearly one-fifth of employers offer family leave benefits that are more generous than that required by the Family and Medical Leave Act (FMLA) and local laws (if applicable). Some do so by keeping such employees on the payroll when they aren’t required to do so. Common “beyond FMLA” family leave benefits include offering:

  • A longer duration of job-protected leave,
  • Leave for “a broader set of new-parent circumstances” than required by law, and
  • Leave with fewer administrative and documentation requirements.

Who’s Eligible?

Employers with those more-generous-than-required time off policies for new parents generally did not distinguish between benefits for mothers, fathers or adoptive parents. Nearly three-fourths also offered them to domestic partners of parents, and about half did so for foster parents.

Whether a PTO bank policy is appropriate for your organization will depend on your employee demographics, human resource philosophy and how you feel about policing the reasons why employees miss work.

A first step in examining whether instituting such a policy makes sense — assuming you haven’t already done so — might be comparing your total average employee days away from work to the average PTO allowances (by employee tenure) revealed in the WorldatWork survey. If the number is higher, and you don’t have an unusually unhealthy workforce, it might be a good idea to give the PTO bank concept a careful look.

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