Vacation Anyone? 5 Reasons to Revisit Your Paid Time Off Policy Now!

By: markweaver Monday June 8, 2015 comments

School’s out, the weather’s great, the mountains beckon, and employees want time off.  For many employees, time off is one of the most important benefits an employer can offer.  Companies that provide attractive time off benefits have a distinct advantage in recruiting and retaining today’s workforce.  Following are 5 things to look at right now regarding your paid time off policies.
 
1.  What are you rewarding?  Every new generation entering the workforce wants more time off than they get.  Maybe that’s because younger workers start at the bottom tier with a minimal amount of time off, while those who have been around 10 or more years have considerably more.  Ever ask yourself why?  Are the longest employed always the most productive?  If so, then why not give them a larger percent salary increase based solely on longevity.  Typically, organizations “Pay-For-Performance.”  Why not apply that to time off?  Or why not grant time off in equal amounts for all employees?  It doesn’t have to be structured the way everyone else does it, or the way it’s always been done.  Check your business case for the way you do what you do.  Make sure it works for the workforce you want to attract and retain.
 
2.  Do you want to discriminate?  That sounds bad because of the illegal connotations, but discrimination in favor of performance, alignment, and behaviors is completely legitimate (as long as the impact isn’t discriminatory in ways that aren’t).  Time off is one of the few benefits that aren’t heavily regulated by government.  Colorado Wage Law, the Department of Labor, and the court system have views on how employers must pay out accrued time off benefits upon termination of employment, but that’s it.  You have latitude in negotiating packages for key employees, and in designing incentives that today’s workers value.  You can’t do that with health insurance and retirement plans.
 
3.  Do you want to dock exempt employees’ pay?  This makes sense only in the context of a salaried exempt employee who is excessively absent.  Exempt employees who take a day or a partial day off must be paid their full salary for the week – unless you have a time off plan.  The Department of Labor’s overtime regulations allow you to charge salaried employees’ time off accrual for these types of absences.  If employees have exhausted their accrual, you can dock their pay, not because they took time off, but because they did not have any accrual left to cover it.  You can’t legally dock a salaried employee’s pay without some type of time off plan.
 
4.  How much liability are you accruing?  Time off plans can be structured to limit the liability with an annual cap or a use it or lose it provision.  You can also add features like the ability to borrow against future accruals and/or a payout provision for unused time off.  All of these decisions have consequences.  A calendar year use it or lose it provision can create a lot of employees wanting to take off at the end of the year to burn up leftover accrual, creating year end staffing problems.  Financially strapped employees may not take needed time off to refocus just so they can get the extra money offered through a payout provision.  Your plan should be tailored to fit your business needs and thought through to avoid unintended consequences to morale and behavior.
 
5.  How are you structuring it?   Some employers have separate banks for sick and vacation time.  Combining them in “Paid Time Off” or PTO allows employees to self-manage the time they take off; those who use more sick and personal time will have less time to spend on vacation.  With PTO, companies get more advance notice of the need for personal days – while having separate banks for vacation and sick leave time can foster lying and calling in sick when the employee just needs a day off.
 
With 3 kids who play or have played high school basketball, I know there is value in the coach taking my kids out of the game to catch their breath, rather than running them ragged.  Vacation is much the same way.  It’s tempting to want your best team members to be “on” all the time, but you’ll get far better results if you give them some time out to get refreshed and reinvigorated.
 
At Open Door HR Solutions, we honestly believe that the right team, united around a compelling vision, can change the world.  We help organizations create vision, culture, and an enviable employment brand.  We help them find and keep the right team members through tailored compensation, benefits and perks.  When needed, we help them part ways with the team members who have not worked out.  And we help get everyone on the team focused on the compelling vision… your vision.  All that so that you and your team can go change the world.
 
Mark Weaver, SPHR, SHRM-SCP, QES
[email protected]
970.420.3187