Should Employers Rethink Their PTO Policies Under COVID-19?

The spread of COVID-19 has left businesses to worry about their PTO policies, and if they can afford to keep unused vacation time on the books


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We hear from 3 experts on how to tackle PTO policies in light of COVID-19

Paid time off (PTO) has been a strong hiring, recruiting, and retention tool for employers. It’s a win for employees favoring more flexibility in their lives.

But like so many aspects of everyday life that COVID-19 has impacted, PTO policies may need adjusting to meet today’s reality. More employees are quarantined, working from home, and vacationing less. As a result, employees are accruing more PTO than many employers can afford to lose in dollars and productivity.

The U.S. is one of a few industrialized countries without a national PTO policy, leaving it up to employers to decide whether to provide workers with paid authorized absences.

A note on the term “paid time off”: Paid time off (also referred to as PTO), is a combination of vacation days, sick leave, and personal time that an employee can use at their discretion. 

According to the U.S. Bureau of Labor Statistics (based on 2017-18 data), 66% of U.S. workers can access PTO, while an overwhelming majority of private-sector workers  – 85% – receive paid vacation time.

However, a Workest survey found that half of employees don’t use all their allotted PTO. The reasons range from job-loss fears to the need to be connected electronically to the office 24/7. Additionally, employees at almost 3,000 companies submitted about 63,000 requests to take vacation from April to May, according to data from Zenefits. During the same time last year, about 120,000 requests were made.

But enter COVID-19, and the question becomes whether employers should adjust their PTO policies to handle virus-induced illnesses, quarantines, large banks of accrued time off, and work-at-home arrangements fueled by distancing.

Rethinking policies

Companies are adjusting work schedules to meet employees’ preference for more flexibility in balancing work and personal time. The shift towards a more flexible workplace is backed by other studies, such as the new Survey on Absence and Disability Management by Mercer, the employee healthcare and investment consulting firm. Survey results concluded that companies should review and update their benefits plans to keep up with workforce demands.

But is COVID-19 forcing employers to alter their policies, depriving workers of the flexibility they want? If companies are thinking of tightening rather than expanding their policies behind the pandemic, this might not be the best time to do so, said Nicholas Stuller, a small business owner and founder at My Perfect Financial Advisor.

For employers with a tracked time off policy, he advocates allowing staff to carry over PTO to the next year, particularly during the pandemic.

“A lot of companies only consider physical health needs when setting up their workplace and healthcare benefits, but it can’t stop there.”

“Employees have been stressed enough [and therefore] there’s no need to force them to use their PTO in one year,” he said.

Loreal Torres, chief people officer at Vested, agrees. She cited time off as crucial in maintaining employees’ physical and mental health during the pandemic and described PTO as an underused benefit since COVID-19 took hold.

“I do believe that employers that have an accrual rate should allow carryover this year, given the unique circumstance of the pandemic,” she stated.

She also believes that encouraging staff to take some downtime is important to avoid having them face burnout.

The heightened stress levels brought on by the pandemic are challenging companies to broaden their benefits policies, said Maestro Health CEO Craig Maloney.

“A lot of companies only consider physical health needs when setting up their workplace and healthcare benefits, but it can’t stop there,” he said. “They need to consider their employees’ physical, mental, social, financial and spiritual health when creating policies to support their overall wellbeing.”

Maestro Health surveyed more than 2,000 U.S. employees and found that 51% of them experienced work-related stress at least weekly, and 69% have succumbed to burnout.

“Providing employees with the flexibility to take days off and encouraging them to do so regularly can make a strong impact on reducing stress levels and the risk of burnout.”

“Providing employees with the flexibility to take days off and encouraging them to do so regularly can make a strong impact on reducing stress levels and the risk of burnout,” Maloney said.

Some companies offer unlimited PTO, a generous benefit that Stuller said worked well in his last 2 companies. Employees appreciated the benefit and were more vested in the company’s success, he said. He believes that the key to offering unlimited PTO is having managers who make sure their team members are performing well and keeping their work on schedule.

“Employees are smart enough to know that if everyone took too much time off there would be no company,” Stuller said. “Employees never took advantage of unlimited PTO and who, in fact, had to be pushed to take at least 5 consecutive days off.”

PTO During COVID-19 Infographic

PTO in response to COVID-19

If a “use it or lose it” PTO policy is not a good look for employers during a pandemic, how should they balance leniency while maintaining sufficient staffing levels, especially during the summer months?

In response to the pandemic and the underutilization of PTO, Vested adjusted its policy to encourage employees to take more time off and spend less time at their computer screens, Torres said. The international company’s approach includes:

  • Setting a minimum of 5 PTO days for employees to take between June and September
  • Rotating early-end days on Fridays, which don’t affect the 5 PTO days
  • Tracking time off weekly to ensure that all employees have the time off they requested or planned this summer
  • Offering employees in the UK office “day aways,” which are last-minute PTO days that they can take during the summer.

Communicating policy changes

Communicating a policy change – whether positive or negative – can be a sensitive change for workers and a difficult balancing act for employers. The Society for Human Resource Management (SHRM) offers a 7-point plan for preparing a PTO policy change and communicating it effectively to employees:

  1. Consider adopting an agreement that promises to provide employees with advanced notice of a policy change, if no such agreement exists.
  2. Check bargaining unit agreements to see if there are restrictions on employers’ ability to make policy changes.
  3. Get staff buy-in on new or revised policies, by such means as forming a committee of employees and other stakeholders to review policy proposals and recommend revisions.
  4. Find out if state or federal laws will impact a policy change. For example, some states regulate how PTO/vacation payouts are handled when employees are terminated.
  5. Review proposed policy changes with the company’s leadership, impacted departments (e.g., payroll and accounting) and the company’s legal representative to ensure compliance with state, federal, and local laws.
  6. Communicate the revised policy to employees in advance of implementing it as a best business practice, keeping in mind how their morale, work/life, finances, and jobs will be affected.
  7. Make sure all employees are aware of the policy change, which can be verified through their written or electronic signature, an email or other proof of acknowledgement.

Torres stressed the need for employers to know what legal snafus might be involved in a PTO policy change and the message they want to send employees in communicating it. She recommends announcing the change in a staff meeting and following up with a company memo to answer questions employees might raise.

The more extensive the policy change, the greater Stuller said the need is for a team meeting, town hall gathering or Zoom-type format to communicate the reason for the revision.

Maloney said that communicating the policy change early and often has been successful at his company.

“Our team has appreciated the constant communication, which has also allowed for more networking and communication with colleagues in this remote work period.”



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