PTO BANKS: An Inexpensive New Employee Benefit?

PTO BANKS: An Inexpensive New Employee Benefit?


STORY Amanda Lynch

Despite the current economic downturn, many human resources executives say their workforce is still demanding flexibility with compensation, responsibilities, and most of all, time spent away from work. The challenge for managers and HR execs is delivering some degree of this flexibility while maintaining overall worker productivity.

Increasingly, some organizations are finding that paid time off (PTO) banks can help them meet this challenge, and maybe even give their employees a boost toward achieving the much-sought holy grail of work-life balance.

In contrast with more traditional time off (TTO) programs that keep separate accounts for vacation, sick, and personal time, PTO banks act as a sort of central repository for all compensated time off, sometimes even including holiday time. Record keeping is greatly simplified and the responsibility of making sure that time off is allotted appropriately falls squarely into the laps of employees, thus freeing managers’ to see to other more pressing matters.

Many employers are thrilled to adopt PTO banks for the ease of administration. “We see the majority of companies utilizing a PTO system, and we use that practice ourselves,” says David Lewis of Express Employment Professionals. “We need to move quickly and a PTO system makes record keeping and time accrual tracking much simpler.”

A less energy-intensive administrative process isn’t the only thing luring organizations to PTO systems. Many PTO users report the feeling of trust it conveys to their employees brings a nice morale boost. “It is my experience that people truly value the ability to privately schedule PTO to meet their personal needs,” says Greg Santi, a director of human resources in New York. Today’s workforce faces unique challenges, he explains, and a well-administered PTO program provides the opportunity to meet those challenges. “With expectations clearly communicated, staff members do plan their time in advance without having to ‘call in’ the day of and be less then truthful about why they cannot attend work.”

That’s something most employers can relate to—a wealth of unplanned absences every year. With those “sick days” accruing, even the most dedicated employee feels entitled to use them, sick or not. These unscheduled absences come at quite a cost. According to some estimates, large corporations may lose $1 million or more every year due to lost productivity.

Could simply changing the way time off is distributed really have that much of an impact on an employer? Maybe. According to the Alexander Hamilton Institute’s 2008 “Survey of Time Off and PTO Program Practices,” 44 percent of organizations using a PTO model report since converting to the PTO system, their number of unscheduled absences dropped by more than 11 percent. Changing to a PTO system also caused a quarter of respondents to see a decrease in the number of employee requests to take unpaid time off or to borrow time. Additionally, a full two-thirds of PTO user respondents reported that each employee missed an average of four or fewer days a year due to unscheduled absences, compared with only 57 percent of TTO users.

With numbers like that, it might seem surprising that more companies haven’t embraced PTO banks. But no system is without detractors, and PTO systems are no exception. “I have some very mixed thoughts about [PTO’s] use,” says Linda Konstan, a Denver-based human resources consultant. “Even I love the feeling of using all my time for true vacation. However, as a human resources professional, I really dislike the presenteeism it creates.”

Presenteeism, or employees showing up for work not fully engaged and able to work effectively (as in, when they’re ill or preoccupied), is a very real concern. By some accounts, presenteeism can cost employers an estimated $2,000 a year per employee.

Konstan relates a story from her own experience: Two employees showed up for work ill, with coughing and sore throats. They sat through a day of meetings, and within a week almost everyone who had attended the meeting showed similar symptoms. Bronchitis and pneumonia ran through the company. “We had to hire temps one week to get us through,” she says. “PTO can be a great perk for those who aren’t sick much, or who can be flexible with their time. But it can be an HR nightmare during cold and flu season.”

Another issue with PTO organizations must consider is in many states, all the time in the PTO bank is legally considered part of overall compensation and must be paid to employees upon termination. On the other hand, in traditional time off structures only vacation and personal time are thought of as compensation.

So what’s best? Well, again, it depends. Some more unique businesses have found the PTO system helps them to best respond to their employees’ needs. For example, Tonda Tan, vice president of human resources for Amelia Island Plantation resort, explains why her company employs a PTO system: “For many years, we offered a traditional plan, but we found that our operating departments and employees struggled to take traditional holidays and vacation time. In the travel and tourism/hospitality industry, some of our busiest times take place when everyone else is on vacation or holiday. Because of that dynamic, we find that our PTO program provides maximum flexibility for both the organization and the employees in managing and using their time off from work.”

Another unique organization, the American Cancer Society of New York and New Jersey, employs a hybrid policy, including both a PTO bank of days and a separate bank of medical days. The PTO bank includes vacation and personal leave, while the medical bank provides 10 days a year of leave employees may use for a qualifying illness. Additionally, staffers are permitted to donate these days to the catastrophic illness bank that seriously ill colleagues may draw on if necessary.

Obviously, the individual characteristics of each organization must be considered in order to choose the most optimal time off program. If a change is in order, communication is the key to a smooth transition. “Converting from one system to the other can be like running through a mine field,” says Lance Anderson, a nonprofit senior professional in human resources (SPHR). “I’ve heard of companies botching the change-over with poor communication and in some cases taking back a few paid days off in the process. Now that will keep your phone ringing for weeks.”

If, all things considered, it is indeed time to negotiate the minefield of changing to a PTO bank, rest easy. A full 80 percent of PTO users surveyed by the Alexander Hamilton Institute commended the system, saying it fully met their expectations, and 16 percent said it exceeded their expectations. For the right company, with the right procedures in place, it seems that PTO banks can offer benefits for both management and employees.


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