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Is Your Paid Time Off Policy Working?

For those of us following HR trends, we recognize there is a lot of attention being given to paid time off (PTO) policies.  You’ve surely heard of Netflix and their unlimited time off policy.  Some Silicon Valley companies are even offering paid time off to protest.

While unlimited vacation policies are drawing a lot of attention, only 2% of companies actually have such a policy according to SHRM.   Those that do offer one say it helps in both recruiting and retaining employees.  An unlimited policy also eliminates the need to negotiate over time off with seasoned employees in the recruiting process who often have more leave time built up in their current position.

I’ve talked a lot about this subject in HR forums.  The rules have changed when it comes to time off, particularly when employers are recruiting millennials and digital natives, the newest generation entering the workforce.  These generations have different value systems than previous ones and while they are career focused, they value time off and it can be a tiebreaker for organizations looking to hire top talent.  I often say that under the traditional PTO system (1 week after a year, 2 after 3, 3 after 5), that a millennial may have 3 different jobs by then.  The traditional vesting schedule for PTO is no longer valid.  If you change the PTO equation you may also change the turnover equation.

That doesn’t mean that generous leave policies come without struggles.  Many organizations have hourly workers.  Manufacturers have work to be done and scheduling is vital.  There’s always the concern about people abusing the system.  But these struggles shouldn’t mean an organization shouldn’t relook at its policies.

In fact, studies have shown that employees take less vacation time under a generous leave policy than a traditional one, something that creates its own set of problems.  Leave should be taken as it allows for more engaged and refreshed employees and leaders need to lead by example when it comes to taking vacation.

So, what should you do in examining your current leave policy and thinking about offering a more generous one?  Below are a few thoughts to consider.

  • Benchmark your current leave policy to the market and your direct competition for talent
  • Develop clear expectations on how leave can be used (e.g. no more than two weeks at a time)
  • Move from measuring time at the office to measurable goals – this eliminates the “you weren’t in the office yesterday” discussion
  • Eliminate working during vacation as a badge of honor – this will require some planning so employees don’t stress about their time away
  • Communicate about how the policy aligns with the corporate culture and vision

As organizations continue to grow and meet the demands of the market, whatever they may be, talent is the key ingredient to meet the demands.  A generous leave policy can help in recruiting and retaining top talent.  That said, leave policies must align with the corporate culture and leaders must embrace it.

Our organization recently revamped our leave policy from a more traditional approach to