Effectively Managing Employee Time Off

Recruit Talent in Today's Market

Effectively Manage Employee Paid Time Off

Vacation programs are among the most basic benefits offered by employers: 97% of employers offer some kind of paid vacation policy.1

But finding right vacation policy — one that will help you retain and attract talent, and contribute to a positive work-life balance for your employees — can be tricky.

1. How Employees Use Vacation Time

Employees treasure vacation time: it’s the number 2 ranked benefit contributing to employee satisfaction as ranked on Glassdoor, just after health insurance.2 However, while employees say they value vacation, many — particularly Millennials — do not take their full allotment.

The U.S. Vacation Deficit

A 2016 survey found that 41% of Americans said they didn’t take a single vacation day during 2015. 17% said they took fewer than five vacation days that year.3

Another study found that 658 million days went unused in 2015. Of those, 222 million days were lost — days that cannot be rolled over paid out, or banked for any other benefit.4

Millennials are the generation most likely to forfeit time off, even though they earn the least amount of vacation days.

The Problem of Unused Vacation Time

Unused vacation days compound stress, taking a toll on workers’ well-being and the well-being of their families. In addition, unused vacation time can reduce productivity and innovation at work.

84% of managers agree that when employees take time off, they return to work with improved focus and creativity.4

A Culture of Vacation Deprivation

Work martyrdom and the always-on nature of the Internet-driven work environment may be contributing to America’s vacation deficit. Employees who become accustomed to working requests via smartphone in off hours may feel it’s impossible to unplug for multiple weekdays at a time. This work martyr syndrome can lead to a culture of vacation shaming, and contribute to workers’ perceived inability to fully unplug from work during vacation.

  • 47% of workers surveyed have felt shame at work for taking their well-deserved vacation.5
  • 47% have felt the need to justify taking their vacation days.5
  • Only 44% of workers reported that they never worked on vacation, down from 48% the year prior.5

Creating a vacation-friendly culture is important for employees’ well-being since multiple studies have linked the practice of taking vacations to good health.6 Healthy employees are more likely to be productive and happy employees.

Read on to learn about paid-leave offerings, vacation policy considerations and how to create a PTO-friendly culture that will ensure your employees don’t suffer stress-related burnout or vacation shaming.

2. Paid Leave Plan Offerings

The majority of U.S. companies (53%) still use a traditional paid leave system. Traditional systems typically allocate leave time into two or three categories: vacation time, sick time, and personal days. In the last decade, many companies have shifted from the traditional system to a PTO bank, which offers a pool of paid days for employees to use at their discretion.

Percentage of Companies Using Paid Time Off Programs Graph

Paid time off plans varies widely by country. The U.S. has no statutory requirement that employers offer paid vacation or sick leave. In the EU, the paid holiday entitlement is set at a minimum of four weeks per year, exclusive of bank holidays, and sick leave varies by country.

PRO TIP

Employers with a European workforce may wish to review our report “Which Countries in Europe Offer Fairest Paid Leave and Unemployment Benefits?” for program comparisons by country.

3. Managing Your PTO Program

When forming or reconsidering your paid leave program, be sure to consider legal regulations as well as industry norms.

Define Your Policy

A written vacation policy that is managed well is essential for supporting employees to take vacations. Use this checklist to make sure you have all your bases covered:

PROGRAM CONSIDERATIONS
  • Will vacation and sick days be allotted in separate buckets?
  • Will both full- and part-time employees receive paid vacation and holidays?
  • Will PTO be earned per pay period: monthly, quarterly, or annually?
  • How far in advance do employees need to request vacation time?
  • How will unexpected events such as emergencies, bereavement, and jury duty be considered?
  • How will employees be compensated during weather closures and/or natural disasters?
  • How will paid holidays be considered for those employees who are required to work on holidays?
  • Will yearly PTO allotments increase with tenure? At what intervals?
  • Will unused PTO roll over from one year to the next? At what point will it expire?
  • Will there be a cap on PTO rollover?
  • Will employees be able to add unused vacation funds to 401(k), HCSA or receive payment for it?
  • Will employees receive a paid sabbatical after a specific amount of tenure?
ADMINISTRATIVE CONSIDERATIONS
  • Who will be responsible for the management of PTO?
  • What system will house employee PTO data?
  • How will employees learn about the vacation policy?
  • Where will they be able to reference the written policy?
  • How will employees request time off?
  • How will employees or managers log time off?
  • How will employees find out how much time they have accrued?
  • How will pay for unused vacation time be distributed upon employee departure?

4. Pros and Cons of Unlimited PTO

The recent trend of unlimited PTO can be seen as a competitive advantage. However, the practice has only been adopted by one percent of companies.8 Some companies have tried it and returned to a defined PTO system.9

Pros
  • Administrative efficiency. Not having to keep track of PTO eliminates one more employee metric that must be entered into a system and tracked.
  • Cost savings. Accrued vacation time can be a liability on a company’s balance sheet. In addition, unused time may need to be paid on upon an employee’s departure.
  • Employee flexibility. Many employees enjoy having scheduling flexibility and not having to define whether they are taking a “sick” day or vacation day when needed.
  • Morale boost. Employees can be excited about the benefit and feel empowered with the level of trust afforded them to use free time at their own discretion.
Cons
  • No clear expectations. Unlimited PTO can backfire when employees don’t know how much time to take. They may not end up taking many vacations at all, adding to the stress and causing burnout.
  • Overlapping vacations. Without a system to track vacation requests, too many employees may take a vacation at the same time (such as during school vacations). This can put an undue burden on the remaining employees, or impact project timelines and/or customer accounts.
  • Lack of manager/leader modeling. Employees often look to managers and company leaders for models of how much vacation to take. If managers don’t take vacations, employees may not feel entitled to do so themselves.
  • Resentment over lost accrued vacation time (funds). Switching from a PTO bank system to unlimited PTO may cause resentment if existing accrued time is not paid out.

Unlimited PTO is not right for every workplace. If trust and transparency are already strong traits of the culture, and a plan is put in place to set expectations with managerial support, unlimited PTO may be a good option for your company.

65% of employees reported that they hear nothing, mixed messages, or discouraging messages about taking time off from managers, while 80% said if they felt fully supported and encouraged by their boss, they would be likely to take more time off.4

5. How to Create a PTO-Friendly Culture

The most generous vacation packages are meaningless if the culture does not support taking time off. A culture that supports PTO starts with managerial support.

Vacation Transparency

Because managers may be overburdened themselves, vacation should be a topic that is discussed openly in 1-1 meetings and performance reviews. Consider these tips for supporting vacation discussions:

  • Encourage company leaders to mention their own vacations and publicly encourage others to take theirs as well.
  • Position managers’ vacations as growth opportunities for staff.
  • When planning performance goals and projects, build in vacation time considerations. Simply asking, “Who is going to be on vacation this quarter?” can help set expectations for a project team.
  • Provide guidelines for the notification time required before vacations, particularly for longer absences.
  • Help employees to plan for vacation coverage, and encourage them to support colleagues during their vacations.
  • Set clear expectations around answering email and phone calls on vacation. Encourage employees to set out-of-office replies or use an app such as Thrive Away, which deletes emails received during vacation.
  • Plan for re-entry. Returning to hundreds of emails and a burgeoning task list is no fun. Anticipate the number of time employees will need to catch up, and schedule projects accordingly.
PRO TIP

Host a series of employee focus groups to find out how employees perceive the current PTO plan and determine how they can be supported for more effective vacation planning.

Reward smart work, not overwork

Constantly rewarding or honoring staff who burn the candle at both ends and don’t take vacations can lead those who value work-life balance and family time to feel ashamed of their desires and set up for mediocre performance reviews compared to overachievers. Working hard doesn’t have to mean working long hours.

Publicly rewarding smart work, not overwork, creates a culture that includes the contributions of both those who are available to work extra hours as well as those who aren’t.

PRO TIP

Offer an employee resource group or workplace online channel on the topic of travel. Interested employees can inspire others with photos and vacation stories.

6. Recruiting and PTO

Candidates care about vacation: Benefits are the number three piece of information Glassdoor users want employers to provide as they research where to work (after details on salary/compensation packages, and insight into what makes the company an attractive place to work).10

Incorporate discussion of your PTO plan into your employer brand communications so that candidates can make informed decisions. Many employers include a benefits summary that includes PTO information in job descriptions and on their employer website.

In addition, you can use Glassdoor in the following ways:
  1. Add a Vacation & PTO Benefits Summary to your Glassdoor Profile — unlock your free employer account.
  2. Check Glassdoor vacation benefits ratings and reviews for feedback on your current plan.
  3. Use Glassdoor for competitive research on vacation plans. Find out what types of plans your competitors are offering, and how employees rate them.

Conclusion

Whether you’re dreaming of the beach, the mountains, foreign lands, or just spending extra time with the family, remember: your employees are too. Creating a competitive vacation policy and encouraging your employees to use it in a transparent way will help reduce burnout and encourage productivity.1

In addition, you can use Glassdoor to inform your vacation policy decisions and communicate your PTO plan to candidates interested in working for you.

Citations

1. SHRM, 2016 Employee Benefits, June 2016; 2. Glassdoor Economic Research, Which Benefits Matter Most?, June 2016; 3. Skift, No Vacation Nation, January 2016; 4. Project Time Off, State of the American Vacation, 2016; 6. Alamo Rent-A-Car, Vacation Shaming in the Workplace, March 2016; 7. Huffington Post, Health Benefits of Taking a Vacation, March 2016; 8. World at Work, Paid Time Off Programs and Practices, June 201; 9. SHRM, Unlimited Vacation: Is it About Morale or the Bottom Line?, March 2017; 10. Glassdoor.com U.S. Site Survey, August 2016