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Do You Need to Revisit Your Firm's Vacation and PTO Policy?

Do You Need to Revisit Your Firm’s Vacation and PTO Policy?

Feb 26, 2021 | By Isaac O'Bannon | 0 Comments

Topics: Employees, Human Resources, Payroll, Comp Time, Featured

Vacation. Remember that word? Whether it inspires thoughts of beaches, mountains, cruise ships or French bistros, the word seems a far-off memory. With work-from-home being the new normal for many firms since the Covid pandemic arrived, and with travel options limited by some state and foreign governments, many of us may be sorely missing a nice vacation. And with vacation hours accruing for many staff members, now is a good time for management to review their policies regarding paid time off. 

Paid time off (PTO) is a staple of professional compensation packages, and comes in a variety of models, often with multiple options bundled together. And even though many of those earned time off perks may not be going fully used at the moment, they are still a critical part of the benefits that workers expect as part of their pay. 

Paid Time Off/Vacation Time 

Most professional-level salaried workers earn PTO on an accrual basis, starting with two or three weeks off per year, earned on a pro-rated basis throughout the year. This often is added to as the employee gains tenure with the employer and their position, often growing to four or more weeks per year of paid time off. Additionally, workers are often granted sick leave, but this time is often added to general paid-time-off, so as to not penalize workers who don’t get sick. But even for the most healthy of workers, time off can be a critical wellness issue, as it allows them to unplug, unwind, recharge and refresh their mind, body and spirit. This pays dividends to the business, as employees return more productive and capable of producing higher quality work, according to the American Psychological Association. 

Holidays 

It is common for most staff to also receive full pay for holidays, without it counting toward their paid time off balance. If the firm is closed due to a major holiday, such as Christmas, Thanksgiving, Independence Day, or Labor Day, the workers receive full pay as they would a work day. In accordance with federal and most state laws, if some staff are required to work on these days, particularly hourly-paid workers, it may be necessary to pay them time-and-a-half. For holidays of lesser national significance, some firms offer floating holidays, which staff can use to select the days they want off. 

Other Types of Paid Time Off 

In addition to traditional vacation and sick time, most professional firms also offer their staff time off for parental/family issues (most often for caring for newborns or prolonged family illnesses), bereavement, and jury duty, as well as for members of the military reserves to complete their annual service training requirements.  

Comp Time/Flex Time 

An ever-popular option is also flex or comp time, allowing staff who occasionally work longer than normal hours to take off comparable time to make up for it, without impacting actual time off or their pay. In other words, if it is necessary to work an extra 4 hours one week to meet a busy workload that will return to normal soon, a worker may be given the option to take off a few hours early on one or more days, equaling that extra time worked, to compensate for it. 

Unlimited PTO 

Over the past few years, some large companies and professional firms have introduced unlimited time off policies, in which staff can take off as much time as they need or want for vacation, sick leave, attending their children’s events, or other issues. The initial concern for employers is, of course, how much of a risk there is for abuse of an unlimited PTO policy. There are several guides for implementing these policies, but most employers have found that staff with more experience are not likely to misuse unlimited PTO, as long as their work goals are clearly defined and benchmarks or other productivity measurements are used. 

Mandatory PTO 

Many studies have found that PTO is beneficial for employees, allowing them to unwind from work stresses, reconnect with family and friends, expand their personal horizons and pursue personal hobbies and pastimes. This also directly improves work productivity, as the staff are refreshed and are often healthier. However, Americans are frequently reluctant to use their PTO, as they are concerned it may make them look less integral or necessary to their employer. According to a study by the U.S. Travel Association, more than half of American workers don’t use all of their vacation time each year, citing fear of falling behind at work, looking replaceable, costs of vacations, childcare needs and other factors. 

But the cost of not taking vacation actually adds up for both workers and employers. Staff get stressed, performance lags, and they are more likely to call in sick, with unplanned missed workdays causing a bigger disruption on productivity than do planned PTO days. As a result, many firms are now requiring staff to use their vacation time. In an article in Harvard Business Review, a TED Talk speaker discusses how his company mandated its vacation time. Every seven weeks, his firm would close for one week, with all clients and staff knowing in advance of the down time, so that it was prepared for. He then discusses the benefits and side-effects, and the resulting increase in creativity and worker happiness and productivity. 

Conclusion 

Our profession is a core component of our lives, but should not totally overrun the personal aspects. Vacation is critical not only to our well-being, but also firm productivity, and as part of compensation packages that help recruit and retain the best staff. Revisit your firm’s vacation policy and consider engaging compensation consultant to ensure your firm has an effective policy.  

The Author

Isaac O'Bannon

Isaac M. O’Bannon is the managing editor of CPA Practice Advisor and has been advising accounting and technology firms for 20 years.

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