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The move to adopt PTO banks—the practice of combining vacation, sick, and personal days into a single “bucket” employees can draw from at their discretion—appears to be leveling off among U.S. employers, according to a new survey from WorldatWork.
Just over half (52 percent) of companies participating in the 2016 survey reported using traditional leave systems that allocate vacation, sick, and personal days separately, compared to 43 percent of employers that have adopted PTO banks. In comparison, the traditional system vs. PTO bank rates were 71 percent and 28 percent, respectively, in the first year the survey was conducted in 2002 and 54 percent and 40 percent in 2010.
Employers that have converted from a traditional system to PTO banks contend that this alternative saves money and is more efficient to administer over the long haul, says Lenny Sanicola, WorldatWork senior practice leader. A common reason cited for making the switch is a desire to reduce unexpected employee absences.
But converting to a PTO bank may involve short-term costs in converting sick days, which typically can’t be carried forward year after year, into vacation days, which become an earned benefit on the books and can be accumulated.
Though the survey didn’t ask about employee preferences, Sanicola suggests that PTO banks might be favored by employees who want more control to bank their time off for extended vacations, while those who tend to use all their allotted sick days every year might prefer the traditional system. When companies shift from traditional to PTO bank systems, they reduce the number of sick days that go into the bucket, typically three PTO days for every five traditional sick days, he notes.
PTO banks are especially popular among health care and social assistance organizations, with 79 percent of respondents in those sectors employing single-bucket paid-time-off systems. On the other hand, 64 percent of manufacturers have stuck with traditional systems. The finance and insurance sector is more evenly split, with 51 percent maintaining traditional systems.
The three top reasons survey participants cited for offering vacation and sick leave under either system are (1) to encourage employees to take time to rest and rejuvenate, (2) to improve recruitment, and (3) to meet employees’ expectations. Among other findings in the WorldatWork survey:
- Whether they rely on a traditional system or PTO bank, most employers increase paid time off based on seniority. Among companies with traditional systems, the average days off allotted annually increases from 20 for new employees to 37 for those with more than 20 years of service. For employees with PTO banks, the same range is 16 to 27 days.
- With the vast majority of respondents (96 percent) classified as “covered employers" under the U.S. Family and Medical Leave Act, 82 percent reported offering job-protected leave as mandated by that law; 18 percent offer more employee-friendly benefits, with longer leaves and more flexibility than required by law.
- Among respondents that offer paid parental leave, 54 percent offer fewer than six weeks of paid leave, 16 percent offer six weeks, and 16 percent offer 12 weeks. Almost half of those employers (44 percent) require a tenure of 12 months or more before employees can use paid parental leave.
- At least 70 percent of respondents offer paid time off to part-time employees, typically prorated based on the scheduled hours per week or pay period.
Overall, 88 percent of survey respondents agreed that offering paid time off is necessary to be competitive in the labor market. Anecdotally, Sanicola says, paid time off seems to be a more important benefit for frontline employees than for management and executive level staff, who often don’t take all the time off available to them.
Citing research beyond this recent survey, Sanicola notes that some companies are experimenting with different PTO strategies to gain an edge in staff recruitment, such as giving employees the option to combine other forms of PTO with family leave so they can take more time off to bond with their newborn or newly adopted child. Other intriguing strategies include giving employees the option to donate unused PTO to colleagues who need it and the opportunity to take a sabbatical.
“Most companies still award vacation time on a seniority-based system, but there is a potential to allocate paid time off as a reward or incentive,” he adds. “It would be interesting to see more employers researching new types of PTO benefits that might appeal to their target hiring demographic.”
