Benefits of alternative time off policies
When Tribune Publishing, owner of many large U.S. newspapers, abruptly announced that beginning in the new year there would be no more separate vacation, sick and personal paid time off (“PTO”) days, employee dissent and fury was so significant that it had to back off and retract its decision.
Under its new discretionary PTO policy, it would have been up to each individual employee and supervisor to agree on almost all time off.
However, there are typically employer benefits to these non-traditional one-bucket or unlimited PTO policies.
In fact, the proposal that drew so much anger at Tribune is the same policy that companies such as Netflix and Virgin promote with pride. In fact, I have had experience on both sides of this discussion, working with companies that have very traditional PTO policies, where typically the number of allowed days off correlate to the number of years worked, and working with companies that have unlimited vacation time. Understandably, employees typically prefer the former, because not only do they get a set number of PTO days, they also have a built-in “severance” plan upon separation in the form of accrued but unused PTO.
The conventional way most people think of PTO is changing, and employers are typically better off if they avoid the mistake made by Tribune and instead effectively communicate and implement policy changes.
The one-bucket system when employees receive a bucket of a set number of days they can take off for whatever reason they want is increasing in popularity because it is easier administratively and because it supposedly increases flexibility and encourages honesty among employees. The unlimited PTO system, while not as popular, offers significant advantages to employers. For one, the employer does not have to accrue for the PTO expense on its books. Secondly, there is a cash flow benefit of not having to pay for accrued but unused PTO upon an employee’s separation.
Our advice to employers is to have an open mind about which policy may work best for you and, if you do decide to make a change, make sure you communicate it effectively to improve the likelihood of a successful implementation.
For assistance with your employment policies, or with any other legal needs related to your business or estate planning, contact Fournier Legal Services at firstname.lastname@example.org or 860.670.3535 now for a free consultation and planning session.
Joseph E. Fournier is an Attorney and a CPA who has more than twenty years of experience in a variety of business legal matters, including start-ups and company formations, drafting shareholder and operating agreements, contracts, employment law, commercial litigation, tax planning and audit defense, and mergers and acquisitions (M&A). He also handles estate planning matters, such as business succession planning, wills, trusts, and probate.