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PTO is among the most critical benefits companies offer, as it helps employees establish a healthy work-life balance, reduces stress and burnout, and improves retention. Despite the importance of PTO, too many companies treat it as a generic check-the-box benefit without considering all the ways its value can be maximized for employees. HR teams must focus on how PTO can be customized to meet the unique demands of their workforces, which will give employees a wider range of options and provide a crucial competitive advantage.
There are many types of PTO, which can be deployed in innumerable ways depending on the company’s specific needs. PTO can be accrual-based, lump sum, or unlimited. HR teams can allow employees to donate and share PTO or redirect the value of unused PTO toward other priorities. These options ensure that HR teams are capable of supporting diverse workforces and providing the flexibility that employees are increasingly demanding. It’s also essential to remember that PTO laws and regulations vary by state, and HR teams are responsible for staying on top of these developments and implementing policies accordingly.
When HR teams move beyond conventional approaches to PTO, they will discover a range of options that will help them better serve employees, cut down on burnout and turnover, and build a stronger company culture.
Choosing the right PTO plan
There are several basic PTO structures for HR teams to consider. Lump sum PTO gives employees all their time off at the beginning of a pre-designated period, typically the start of the year. Accrual-based PTO grants employees time off on a rolling basis, and it can be based on the amount of time they have worked in a given year or their tenure with the company. Unlimited PTO allows employees to take as much time as they need, assuming they have met their work responsibilities, and their absence won’t have a detrimental effect on the company.
Each of these approaches offers benefits and drawbacks. Lump sum PTO enables employees to plan vacations and other absences in advance, and it simplifies record-keeping for HR teams. But it’s also inflexible—many employees don’t know what their calendars will look like for an entire year. Accrual-based PTO is a way to reward tenured employees and increase loyalty, and it offers more flexibility than lump sum PTO. But it will be less attractive to potential hires, and larger PTO allocations based on seniority don’t reflect employees’ individual needs. Unlimited PTO is increasingly popular, and employees are attracted to the idea that they can take however much time they need, but this is often an illusion. Employees with “unlimited” PTO often end up taking less time off because they’re concerned about colleagues’ perceptions and falling behind.
HR teams must engage directly with employees about their needs and priorities to determine which PTO plan is right for them. It has never been more important to offer flexibility, and this is particularly important when it comes to core benefits like PTO.
Related: What kind of PTO packages are employees looking for in 2025?
Going beyond the PTO status quo
Although PTO is one of the most important benefits, 78% of American employees say they don’t use all the time off that is available to them. Even when employees take time off, 60 percent say they struggle to fully disconnect, and two-thirds say they dread the backlog of work awaiting them once they return. At a time when 51% of employees report that they have felt burnout over the past year, their failure to take advantage of PTO is a sign that a culture of overwork is having a harmful impact on well-being in the workplace.
HR teams can’t rely on quick fixes like “unlimited” PTO to address this issue, as doing so fails to address usage rates and can actually contribute to stress and burnout. Instead, they should listen to employees—70% of whom say customized benefits would increase their loyalty to the company. For example, HR teams can offer PTO conversion policies that allow employees to reallocate the value of unused time off toward other priorities, such as retirement contributions, health savings accounts, 529 plans, charitable donations, and student loan payments. HR teams can also offer options like PTO donation banks or the ability to buy and sell time off, as well as specific types of PTO: parental, caregiving, bereavement, sabbatical, and so on.
The particular PTO plans and options HR teams adopt will depend on the character of their workforce and employees’ demands. By taking a more expansive approach to PTO, HR teams will be in a much stronger position to meet the needs of diverse workforces.
How to implement a new approach to PTO
As HR teams investigate new PTO policies, they must focus on how these policies will be deployed and managed. For example, it’s important for HR teams to gather data on usage, satisfaction, and other key metrics to help them determine how well policies are working and what interventions may be necessary. Beyond regular audits of PTO usage, HR teams must focus on compliance with relevant laws and regulations. In many states, the full value of unused PTO must be paid to employees upon separation—a requirement that creates large financial liabilities and can lead to fines or legal action if it isn’t met.
It’s no wonder that a recent Mercer study found that over two-thirds of employers say complying with state and local paid leave mandates is one of their top three priorities. Mercer also reports that 41% of employers say “managing PTO across multiple platforms and departments” is a top challenge. This challenge is even more acute as HR teams adopt a broader range of PTO resources, such as convertible PTO and leave banks. While these resources are more valuable than ever, they also increase the administrative burden for HR departments. These are the reasons HR teams are increasingly implementing centralized systems for tracking and accruing leave, gathering usage data, and strategic planning.
HR teams have never had so many ways to use PTO to meet the full range of employees’ needs. For too long, companies have treated PTO like a static benefit, and this has led to chronic under-usage, the creation of large balance sheet liabilities, and lower levels of employee satisfaction. By taking a more holistic view of PTO and focusing on employees’ individual priorities, HR teams will establish the ideal PTO program for their workforce.
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