Benefits & Work-Life Focus


What's Trending in Paid Time Off?

By Jim Fickess, WorldatWork  |  January 2015

The growth of bank-type systems for employee paid time off has leveled off after a decade of significant gains while the motivation for organizations to employ them is evolving, according to WorldatWork research.

The percentage of respondents using bank-style paid time off (PTO) ticked up just 1 percentage point in the 2014 Paid Time Off Programs and Practices survey from the previous poll in 2010.

The latest survey, released in fall 2014, showed that 41% of responding organizations use bank-style systems while 56% use traditional systems. Bank systems are defined plans that offer a combined bucket  of available days off to be used for a variety of reasons while traditional systems differentiate paid time off in such categories as vacation, sick and personal days.

Figure 1 Title: Percent of Companies Using PTO Systems

But that recent slowdown should not alarm proponents of PTO banks, according to Lenny Sanicola, CCP, CBP, GRP, CEBS, SPHR, WorldatWork senior practice leader, professional development.

"The plateau is not surprising nor a negative," Sanicola said. "Companies that use a PTO bank have found it's a good approach for them while traditional is a good approach for other organizations. PTO banks are not for everybody."

The trend should hold going forward, Sanicola added.

The type of paid time off program most appropriate for an organization depends on such factors as its objectives, company culture, workforce demographics and employee perceptions.

The highest PTO bank-style participation in the latest survey is in the health-care and social assistance category at 72%. That's not surprising since PTO banks originated in the hospital industry and other organizations that have 24/7 operations. Traditional systems are strongest in manufacturing at 66%.

The four WorldatWork surveys over 12 years show a change in the reasons why organizations offer bank-style PTO — these systems are being used less to prevent undesirable behavior and more to allow employees to decide how they utilize their time off.

For example, "reducing absenteeism" has almost disappeared as a motivator for implementing a PTO-bank system, dropping from 21% in 2002 to 7% in 2014.

Meanwhile, the top motivator for PTO-bank systems in 2014 was "to grant employees more flexibility" at 49% followed by "easier to administrate" at 29% and "to stay competitive with other companies" at 14%.

The move to grant employees more flexibility in paid time off may be an offshoot of the economic downturn, Sanicola said.

"Perhaps with the Great Recession and organizational focus on satisfying employee demands for more workplace flexibility, there has been a shift in the reasons for implementing PTO banks," he said. "This was something employers could give employees."

This implies that being able to meet workforce flexibility issues through avenues such as PTO banks gives employees more control over managing their time off, and thus engages employees more and positively impacts workforce productivity.

Other findings from the 2014 PTO survey:

  • There continues to be a trade-off between bank-style and traditional systems. While bank style offers workers more flexibility in how they use their paid time off, those systems generally offer fewer days off. Employees with less than a year of service average 19 days off a year under traditional plans and 16 in PTO banks, according to the survey. That grows to 34 and 28 days, respectively, for employers with more than 20 years of service.

    While not covered by the survey, one disadvantage of a bank-style system can be employees coming to work sick in order to save their time off, possibly exposing others or leading to reduced workplace productivity, Sanicola said.
  • Bank-style PTO systems usually present greater liability for the organization. More than four of five (81%) of bank-style respondents pay out unused PTO at time of employee separation while traditional plans generally pay for unused vacation time but not sick or personal days.
  • Programs such as sabbaticals and employees purchasing, borrowing or donating PTO have not become popular in either traditional and bank-style systems. Fourteen percent of organizations in both systems allow sabbaticals. Meanwhile, 16% of traditional systems allow employees to purchase or borrow additional paid time off, compared to 22% for bank-style organizations. There's a greater difference in employees donating PTO to co-workers, with 17% of traditional systems allowing it and bank style coming in 12 points higher at 29%.

Survey Methodology
WorldatWork emailed 5,524 surveys to members working as benefits specialists and some randomly selected members in May 2014. The survey received 705 responses, a 13% response rate. The survey was intended to assess paid time off practices in the United States only.

The demographics of the survey sample and respondents are similar to WorldatWork membership as a whole. The typical WorldatWork member works at the managerial level or higher in the headquarters of a large company in North America.

About the Author

Jim Fickess writes and edits for WorldatWork and based in Arizona.

Read the January edition of Benefits & Work-Life Focus.

Contents © 2015 WorldatWork. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission from WorldatWork.

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