A Double-Edged Sword? Looking at the Pros and Cons of Having a Paid Time-Off Policy

In 1910, President William Howard Taft made the first concrete move to bring the spirit of the age-old proverb “All work and no play makes Jack a dull boy” to American workplaces. President Taft proposed that workers need 2 to 3 months of vacation (paid time-off) per year “in order to continue his work next year with the energy and effectiveness that it ought to have.”

It’s been almost 120 years since President Taft made this remark. Yet, all proposed laws mandating businesses to give employees paid leaves have been unsuccessful. However, the absence of a law has not stopped organizations from offering paid sick leaves, paid vacations, and paid holidays to their employees. 

For example, according to the Bureau of Labor Statistics, paid vacation leaves (or paid time-off) were available to 70% of workers in small businesses, 85% of employees in medium-size establishments, and 89% of staff members in large enterprises. 

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This could be primarily driven by the tight competition for top talent. It’s no secret that great talent is a rare commodity that all businesses are fighting over. As it turns out, more and more members of the workforce’s crème de la crème (especially among millennials) consider paid time-off benefits as an important deciding factor when choosing a company to work for. 

Paid Time-Off (PTOs): Letting Employees Decide How to Spend Their Time Away from Work

One relatively new way to offer paid leaves as a benefit to employees is through the accumulation of paid time-offs or PTOs. In the past, more companies were offering vacation time broken down into specific allocations. For example, on an annual basis, employees often get 10 days of paid holiday, 2 weeks of paid vacation, 2 personal days, and 8 sick days.

With PTOs, employees accrue paid time off days based on a set of criteria such as tenure and number of hours worked, usually monitored using time tracking software or other tools. On average, employees accrue 30 days of PTOs every year. Unlike the more traditional method of allocating paid leaves to specific purposes, having a PTO policy allows employees to use their paid days off at their own discretion. 

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The PTO model is fast becoming the preferred way of giving employees time away from work benefits. However, before hopping on the bandwagon, it’s important for business owners, HR leaders, and managers to look at both the pros and cons of a Paid Time-Off policy. 

First, let’s take a look at the benefits of having a good Pait Time-Off (PTO) policy.

Fewer Fake Sick Days

Some employees rarely get sick, and it’s not uncommon for these workers to fake an illness to get their paid sick days that would have otherwise been wasted.

Companies with a PTO policy have seen the number of their employees faking an illness decrease. Since there’s only one stockpile of paid days off that employees can use, they often reserve their PTOs for vacation or as a buffer for potential emergencies.

Easier Administration of Paid Days Off

Most of the time, the responsibility of tracking, approving, and recording paid vacation days falls on the shoulders of the HR department and team managers who are already buried under a pile of administrative tasks. With the traditional paid vacation model, they need to worry more about accuracy to make sure employees aren’t going over the allowable number of days per category.

It’s easier to monitor and administer paid days off with a PTO policy since everything is bundled together. It eliminates the need for the HR department or managers to police how employees are using their PTO benefits since employees are empowered to use their paid time off at their discretion. It gets even easier when employers use a time tracking tool that incorporates the PTO policy.

More Flexibility and Privacy on How Employees Use Paid Time-Off (PTOs)

“But you’ve already used all your paid sick days for the year.”

Imagine telling this to an employee who was hospitalized earlier in the year due to the flu, with no paid sick days remaining. Having a PTO policy prevents this from happening by giving employees the flexibility to use their days off when they need and in whichever way they want.

On the topic of privacy, there might be instances when employees are not comfortable sharing the real reason why they’re taking a day off. For example, the extreme pressure in today’s modern workplace is prompting more employees to take mental health days. There could also be instances when employees need to take time away from work because of any number of issues at home. Some things are personal and employees may feel uncomfortable sharing them with their colleagues.

We’ve just scratched the surface of the benefits of having a PTO policy. Unfortunately, there are also downsides.

Below are the cons of shifting to a PTO model from the traditional paid vacation model:

Increased Presenteeism Among Sick Employees

One of the main reasons, if not the main reason why employees put a premium on PTO benefits when looking for a job is the desire to achieve a work-life balance. 

That said, employees would rather spend their earned paid time off traveling or even enjoying a staycation than on a couch tending to a bad case of the flu.

So, while having a PTO policy in place reduces the instances of employees calling in a fake illness, it also increases the number of employees reporting to work even though they’re sick. This is called sick presenteeism.

Almost everyone instantly recognizes the negative impact absenteeism has on businesses. However, you might be surprised to know that presenteeism costs businesses more. How much more? If absenteeism costs businesses in the US, Australia, and the UK $150 billion annually, multiply that by 10 and that’s how much businesses are hemorrhaging cash due to presenteeism.

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Presenteeism is costing businesses 10X more than absenteeism (image source)

It only takes one sick employee to infect 10 more. When this happens, it spells productivity troubles for your company.

If you can’t offer additional sick benefits to your employees (for instance, a work from home option with a reduced level of work output for sick employees), you need to implement a clear rule to prevent sick presenteeism.

Staffing and Scheduling Challenges

From a steady decline of vacation days used from 1981, workers have been using more of their PTOs, a trend which started in 2015.

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Employees have been taking more days off from work (Image source)

There is no data to support that more companies started to adopt a PTO policy in 2015. However, but experts agree that more employees take days off with a PTO policy compared to when sick leaves and vacation days are compartmentalized. This is because employees tend to view all of their PTO days as vacation days and are more inclined to maximize this benefit.

While this is good news for employee wellness, it can pose some challenges when it comes to staffing and scheduling. This is especially true during vacation seasons such as summer and Thanksgiving/Christmas when PTO filing reaches its peak.

It’s important to have a contingency scheduling and staffing strategy in place to mitigate staff shortage if and when mass PTO availments happen. Your PTO policy should also come with a set of procedures, including specific lead times for filing vacation days. This will give you ample time to address any staffing or scheduling issues.

PTO Policy: Yay or Nay? The Key is Preparation

Just like any other employee retention and engagement initiative, rolling out a Paid Time-off policy requires a well thought out implementation blueprint. Thinking of how your business can maximize the pros of having a PTO policy while simultaneously planning solutions for potential problems is the key to a successful PTO policy. This includes having the right strategy, tools, and systems to achieve a tangible and positive impact for your business. It also ensures you attract and keep top talent, giving your employees the benefits of a PTO policy that they deserve.

Author Bio

Dean Mathews is the founder and CEO of OnTheClock, an online employee time tracking app that helps over 9,000 companies all around the world track time. 

Dean has over 20 years of experience designing and developing business apps. He views software development as a form of art. If the artist creates a masterpiece, many peoples lives are touched and changed for the better. 

When he is not perfecting time tracking, Dean enjoys expanding his faith, spending time with family, friends and finding ways to make the world just a little better. You can find Dean on LinkedIn.