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Ready for a new PTO policy? Craft a plan that’s fair and effective

We asked experts from Intuit and Namely how to create the perfect PTO policy. Here’s what they said.

There’s never a bad time to reevaluate (or create) your employee benefits package. Given the current competitive state of employment, companies big and small are looking to retain their top talent.

  • In 2018, unemployment was at its lowest in 50 years.
  • 44 percent of employers are planning to hire more full-time, permanent employees in 2019.
  • Top employee candidates stay available for just 10 days before getting hired.

Yet, according to the QuickBooks Payroll Small Business Pay and Benefits Report 2018, 65 percent of employees say their employer isn’t paying them enough to keep up with the cost of living, and 1 in 10 says they haven’t received a raise in five years or more. No wonder 43 percent are planning to change jobs some time in the next two years.

To get a better idea of how small businesses can maintain an attractive benefits package, TSheets partnered up with Robin Wilson, a global vision strategist for Intuit, and Michael Goldberg, a manager on the people operations team at Namely. The resulting webinar, “How to Craft a PTO Policy That Works for Everyone” seeks to solve one critical component of company benefits packages: what a good PTO policy should look like. To do that, they addressed questions like:

  • Are employees likely to abuse PTO?
  • What other kinds of flexible work benefits might employees want in a benefits package?
  • Is there such a thing as too much time off?
  • How can employers create a PTO policy that’s fair for everyone, including the company?

Let’s jump in.

Are employees likely to abuse PTO?

In a word, no, according to the TSheets’ 2018 PTO survey:

  • For employees who are offered PTO, only 35 percent use all of it and leave zero days behind.
  • 30 percent said that they left at least a day of PTO hours unused.
  • On average, employees left five days of PTO unused last year (that’s roughly 564 million days of unused PTO).
  • 40 percent of employees save their PTO to carry over into the next year.
  • But 1 in 3 says they feel pressured not to take time off.
  • 60 percent of employees say they’ve worked while on PTO.

“Many people and employers assume that working around the clock will lead to improved work performance, and taking vacation time can negatively impact employee performance,” says Michael. As it turns out, the opposite is true. “Overwork is a problem that actually tends to lead to decreased performance, more mistakes, and more absenteeism.”

Michael says this is an issue Namely has also looked into, and they found something similar, connecting the dots between PTO and productivity. “After analyzing Namely’s vacation and performance review data for employees, a correlation quickly emerged. Employees who take more time off tended to have higher, not lower, performance ratings,” he says.

“We found an appreciable difference when cross-referencing the vacation data with these ratings. High performers tended to take an average of 19 vacation days per year while individuals who scored lower took only 14. Employees feel valued when they are allowed paid time off, and this typically results in an improved work culture.”

“Employees who take more time off tended to have higher, not lower, performance ratings.”

Michael Goldberg
Manager, People Operations Team, Namely

Should a PTO plan address any other types of time off?

This might sound like a weird question, but the truth is, PTO policies come in all shapes and sizes. Not only is it the time workers take when they’re sick or go on vacation, but it’s also your flextime plan and seasonal hours. For employers who already allow a certain degree of flexibility by using remote workers or teams, constructing a PTO policy that’s fair for all can be tough but not impossible.

“Some companies have entirely remote teams,” Robin says. “Managing a remote workforce is not always easy, but it can vastly expand your talent network and lead to hires that might not have been otherwise possible.”

When it comes to crafting a PTO policy for these workers, Robin offers these suggestions:

Establish clear guidelines
Set expectations for who is entitled to work remotely, how frequently, and under what circumstances. Certain roles may not be right for remote work, so managers should work closely with employees to set ground rules and processes for remote work opportunities.

Foster an inclusive culture
Use technology that helps remote workers feel like they’re still integrated into the team. Chat platforms and video conferencing tools can enable employees to join meetings and communicate in real time.

Don’t forget about nonexempt workers
Be aware of compliance traps around hourly workers. Fair Labor Standards Act (FLSA) regulations do not prohibit remote work for nonexempt employees. However, the guidelines around this kind of work are ambiguous. Make sure your remote, nonexempt employees have a clear understanding of how to count and report the hours they have worked.

For seasonal schedules, such as summer Fridays, Michael says the most important rule of thumb is to keep leadership in the loop. “With leadership onboard, you can set expectations and guidelines that are comfortable for all parties,” he says.

“Clearly define the period of which the seasonal schedule will take place and alert your employees throughout multiple channels of communication. [Additionally], encourage participation. As with unlimited vacation, employees might have to overcome a hurdle of guilt for leaving early.”

Is there such a thing as too much time off?

There’s been a lot of buzz around the concept of unlimited PTO, even though just 1-2 percent of companies have a policy like this.

“Traditional PTO policies allot 11-15 vacation days per year, on average,” says Michael, clarifying that unlimited policies are designed to give employees just that — a limitless number of vacation days.

“There has been much debate surrounding this practice,” he says. “Some say that it benefits the employer because many employees take less time off when they’re offered unlimited PTO than on the traditional plans.” To encourage employees to take advantage of this benefit, employers must set an example from the top down.

“Unlimited vacation can be problematic in an environment where employees feel their value is linked to office face time,” Michael says. “Managers and peers should encourage vacation time to help reduce any guilt or shame that employees might otherwise associate with taking time off.”

Need a little more insight? There are a few pros and cons of an unlimited PTO policy.

Possible pros of an unlimited PTO policy:

  • Flexibility. With unlimited vacation, employees don’t have to ration out their vacation days perfectly./li>
  • Trust and empowerment. A policy like this shows employees that leadership trusts them to make responsible time-off decisions./span>
  • Increased loyalty, retention, and engagement. Robust paid leave policies contribute to a culture in which employees can trust that their private circumstances will never put their job or finances at risk.
  • Increased productivity. Data reveals that some of the most productive employees also take the most time off.
  • No end-of-year rush. Employees on traditional plans might not take vacation days right away and could realize they have a lot to use before the end of the year. If everyone takes a vacation all at once, managers might encounter some productivity and scheduling issues.

Possible cons of an unlimited PTO policy:

  • Underutilized vacation days. Many employees fear they come across as lesser team players if they take too much time off, resulting in less vacation time than traditional plans.
  • Overutilized vacation days. Though it has been proven to be far less common with unlimited PTO policies, there is a fear that employees will abuse the system and take more days off than the average.
  • Shortened office hours. More flexibility might mean fewer butts in seats all at the same time. A pro of this, however, could be that at certain times of the year, business slows anyway. Many industries wind down in the summer. A slow and empty office can often lead to a lull in employee productivity, so allowing people to check out early or take Fridays off may increase morale and efficiency during the busy seasons.

Limited or unlimited, here’s how to craft a good PTO policy

Putting together a PTO policy that benefits employers and employees alike can be tricky. Particularly when employers don’t yet see the results of their employees’ time off. Here are a few suggestions from Robin and Michael for crafting a PTO policy that covers unlimited PTO or more typical paid leave.

Unlimited PTO

“For unlimited PTO, eliminate ambiguity,” Michael says. “Employees need guidance.” His top three tips include:

  • Making sure you have clear boundaries around what is considered an actionable range of days to take off. Set these standards in an employee handbook for employees to reference.
  • Making sure employees take time off. Consider requiring employees to take a minimum amount of vacation days per year.
  • Fostering a culture that encourages time off. FullContact, for example, gives employees a travel stipend to encourage them to unplug and go on vacation. This could also be built into a company’s culture. Managers and peers should encourage vacation time to help reduce any guilt or shame that employees might otherwise associate with taking time off.

“At Namely, we often share photos of our vacations in our company news feed, encouraging managers and employees alike to shut down and tune out while they are off,” he says.

Paid leave

“Make sure you keep an open dialog,” says Robin. “If your employees are sick, pregnant, or experiencing another time- and resource-consuming situation, you want them to feel comfortable approaching you. When employees know paid leave policies exist, it will help open the door to better communication around how to juggle life events and job responsibilities.” Her top three tips include:

  • Preparing for pending legislation. Even if your city or state has not yet been affected by paid leave or sick time laws, the speed with which cities are introducing new legislation should signal that it might be around the corner.
  • Working with leadership to get ahead and outline what a revamped paid leave policy could look like at your company.
  • Getting everyone on the same page. Most of the recently introduced paid leave policies affect employers and employees alike, so it’s important that everyone in your company understands how the program works.

“Generous paid leave policies can reiterate that your company supports the idea of a work-life balance,” says Robin. “An example here would be, at Intuit, we expanded the definition of bereavement for employees and added pets. We found that furry friend of yours is definitely a member of your family, and we provide one paid day off if your furry friend passes away.”

Robin says Intuit has received great employee feedback from this new policy. Employees who didn’t realize how hard the loss of a family pet was going to hit their family or how difficult it was going to be to explain death to their children have appreciated the company’s stance on bereavement.

For more information about how to craft a fair PTO plan, check out our webinar, “How to Craft a PTO Policy That Works for Everyone.” Then consult an employment attorney in your area to make sure your plan takes into account the specific wage and hour laws of your city or state. And good luck!