As human resources departments struggle to calculate a myriad of mandated leaves and accommodate the complex needs of today's workforce, paid time off plans (PTOs) may be a benefit whose time has come. With employees juggling the demands of work and family and technology transforming the traditional work schedule, combining all paid leaves into a PTO bank provides much-needed control and flexibility.

"PTOs recognize the realities of the world employees live in. When you set up benefits that meet people´s needs, there's less reason for employees to work around them. You have a good balance of cost and benefit," says Marcie Schorr-Hirsch, principal, HirschHills Associates, a management consulting firm in Newton, Mass., whose clients with PTOs include a direct marketing company and a science museum.
Adoption of PTOs is part of a larger trend of restructuring benefits to allow greater employee ownership and flexibility with pension plans going to 401(k) plans and health coverage including health savings accounts, says Kelli Kolsrud, senior information specialist at the International Foundation of Employee Benefit Plans (IFEBP) of Milwaukee.

Yet organizations have been hesitant to switch to PTOs, which have been growing steadily but slowly since they were introduced in the 1980s. Only 25 percent of firms offer PTO plans that combined vacation, sick and personal days into one bank, according to a 2005 IFEBP survey of 432 corporate and public employers. Another survey in 2005 by Mercer Human Resource Consulting of 536 organizations reported that 42 percent offered some type of PTO that combined vacation days with at least one other leave category, such as sick, personal or floating or fixed holidays.

Communication Is Key to Employee Acceptance of PTOs.
Employees may initially balk at PTO banks because employers generally reduce total time off to balance the plan's other benefits, such as the option to take additional vacation days and carryover of unused time. For employees who take off all their sick days every year whether they're sick or not, a PTO is a net loss. Most PTOs include short-term disability coverage to protect employees who run out of leave. Having a PTO doesn't necessarily mean employees use more of their time; they often bank their days for future use or reimbursement.

"Communicating with employees was definitely the biggest challenge," says Clint Davidson, vice president of human resources at Durham, N.C.-based Duke University, which instituted a PTO for the Duke University Health System in 1999, after it was requested by employees. Still, "there were doubters, critics and cynics. Whenever you give somebody less total time off, the question is why am I supposed to like this? It's not an easy concept to understand; we spent a good deal of time educating people and a year later it became a non-issue."

Duke's PTO training included educating employees to effectively manage PTO leave. "We helped people understand how to make PTO work for them. They do a great job of planning time off and using time they have," says Davidson.

PTOs Help Health Care Organizations Reduce Unscheduled Absences.
Health care is one sector that has long embraced PTO banks; the Mercer report found that 86 percent of health care employers surveyed have PTO plans. Because they operate 24/7, hospitals need to keep unscheduled absences to a minimum to ensure continuity of patient care. "We find that a PTO greatly reduces unscheduled absences," says Jeanene Martin, senior vice president of human resources at WakeMed, a 752-bed private, not-for-profit health care system based in Raleigh, N.C. "People don't feel they have to burn sick days so they schedule time off. And because they can bank the time, they take fewer days off."

The WakeMed PTO includes all types of paid leave: sick, personal, vacation and holidays. During the annual open enrollment period, employees can sell back days or donate them to a coworker in need of additional leave to deal with an unforeseen situation. Up to 500 hours of time can be banked, a high number compared to most plans. Such benefits don't come cheap but the hospital feels it is worth the cost.

"Because scheduled time off is so important in delivering quality patient care, anything we can do to limit unscheduled absences makes good business sense. It's also a huge satisfier among nurses and clinical staff who appreciate having more control over their schedule," says Martin.

At Duke University Health System, employees often take advantage of the option to exchange time for money, which "provides a nice added financial stream for employees at an important time-January-after the holiday season," says Davidson. Overall, employees are happy with the PTO plan, as is the university.

"We've realized all our goals for the plan," says Davidson, including fewer unplanned absences, easier benefits administration, and lower costs for temporary workers to fill in for critical health care workers. The plan provides 30 to 40 annual days off and the option to carryover 55 days and 120 days respectively, in short-term and long-term banks.
Presenteeism -- employees coming to work when they're sick to conserve their days off -- hasn't been an issue at WakeMed or Duke. At WakeMed, clinical personnel aren't allowed to work when they're sick; if there's a question about their fitness for working with patients, they consult with the occupational health department.

PTO Flexibility Is a Good Fit for Deloitte.
Flexibility is an integral part of the culture at Deloitte, a global tax and financial consulting firm. As part of its work/life balance programs, the firm offers a variety of flexible work arrangements, strong support for family leave and a PTO plan. "I feel that PTO fits in well with our focus on flexibility," says Alex Wender, Deloitte's national director of benefits. "We're a national company with a diverse population; with a PTO, employees can take time off in ways that that suit their needs and job responsibilities."

The Deloitte plan provides 23 to 28 annual days off, depending on tenure, in addition to eight to ten paid holidays. PTO time cannot be banked, traded or exchanged; employees are compensated for unused time when they leave the company, as in traditional leave plans.

PTO plans are popular among consulting firms, where many employees provide direct client service and have varying demands on their time and need to adapt to the client's schedule and holidays. "The plan satisfies employees and also meets our business needs," Wender says.

Management support is critical for making a PTO work, Wender explains. Deloitte encourages people to take time off and sends reminders to those who have too much time accrued. "If people don't feel they can use their time, it has no value."

Elaine Gottlieb is a freelance writer in Cambridge, Mass. She writes about workplace and business issues, health and technology. Elaine regularly contributes to Workforce Insights, an online resource about emerging labor trends and issues produced by Veritude.

About Veritude

The article originally appeared in Workforce Insights on Veritude.com. Veritude provides strategic human resources - the talent, technology and tactics that growing firms need in order to anticipate and adapt to changes in the workplace. Veritude is a wholly owned subsidiary of Fidelity Investments. Headquartered in Boston, the company serves clients throughout the United States and Canada and is part of Fidelity´s ongoing investment and leadership in outsourced HR services. To review other articles, research and expert analysis relevant to HR professionals seeking to stay informed, please visit www.veritude.com.  For more information, contact: inquiry@veritude.com or call:1-800-597-5537. 

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