This is the first in a multi-part series about offering paid time-off in small businesses. This article looks at the time-off options and how to support your employees as well as your business by offering this benefit.
The team at Kin used to have an unlimited paid time-off policy. But as Craig Bryant, our CEO wrote, the unlimited days “did a pretty poor job of getting folks out of the office.” That defeats the point, doesn’t it? (Which is why we decided to change our time-off model.)
Unfortunately, not taking time off isn’t that unusual for American employees. According to research from Project Time Off, 55% of workers in the United States had unused vacation days in 2015. All together that made for a total of 658 million unused vacation days!
Nearly 65% of employees surveyed by Project Time Off reported that they hear nothing or receive mixed and discouraging messages about taking off from work. When policies are ambiguous and paid time-off isn’t tracked, employees tend to err on the side of taking too few days off. Having clear approach, as well as a practice for scheduling and managing time-off, are important ways to help ensure that employees take time away from work in order to remain productive and engaged.
Paid Time-off Models
Successful time-off models address basic needs for both employees and employers. Ideally, when employees put their time-off to use, it helps them achieve a better sense of balance by providing time to address various needs. And, while employees may not use all of their time-off, according to the Society for Human Resource Management (SHRM), when it comes to what employees want from their employer, time-off “ranks near the top of employees’ preferences even above cash bonuses, modest raises, and future career advancement.”
Even though vacation, personal or sick days may impact small businesses more than larger organizations (due to fewer employees to cover the workload), that’s not stopping small businesses from providing paid time-off.
There are several time-off models, including:
• Traditional leave models which allocate employee paid time off in separate items, such as vacation, sick and personal days.
• Paid time-off (PTO) bank models are those in which time-off allowances are grouped together.
• Unlimited time-off models allow employees to take an unlimited number of paid days off.
The most common time-off model in small businesses is the traditional model in which the business provides days off with a specified amount of days allocated to specific categories (e.g., vacation, holiday, sick, and personal leave).
According to recent data from a WorldatWork survey, only 1% of organizations offer unlimited PTO programs. The most cited reason for offering unlimited PTO leave was, “it aligns with organizational culture”. But 26% of organizations in the survey said they are considering rolling various types of leave together into a PTO Bank model that employees can use for a variety of needs. Employers mentioned the simplicity of plan administration, cost savings, and the recruiting benefits as reasons why they were enticed to change to a PTO Bank model.
Regardless of the model your small business uses, offering paid time-off benefits communicates that your business values employees’ lives outside of work, and as such is an important part of your total pay package.
Time-off falls into two main categories: mandatory and voluntary leave. Identifying what falls into each of these categories is the place to start when determining what paid time-off your business wants to offer to employees.
There are some time-off/leave requirements which are mandated by federal regulations. Whether or not an employer must pay an employee for time off used for these reasons is dependent on local laws and company policy.
Federal regulations require that employers grant leave for the following reasons:
• Family leave (Family and Medical Leave Act and Americans with Disability Act (for employers with 50 or more employees)
• Military duty (Uniformed Services Employment and Reemployment Rights Act (USERRA)
• Religious accommodation (Title VII of the Civil Rights Act)
• Workers’ compensation for on-the-job injuries (dependent on state law)
• Jury duty
Some states also require maternity or paternity leave for an employee who needs time off for the birth or adoption of a child. Although millions of workers are caregivers for young children as well as aging parents, according to the Department of Labor, only 12 percent of U.S. private sector workers have access to paid family leave through their employer.
You may also choose to offer leave that isn’t required by law, although some employers may be required by a labor union’s collective bargaining agreement to offer some of these. Common types of voluntary time-off include:
• Personal days
• Sick leave
According to the National Compensation Survey, which collects data about the percentage of workers with access to and participating in employer-provided benefit plans including paid time-off, about 68% of small businesses provide paid holidays as well as paid vacations for employees.
“For small businesses, I recommend that they mix company needs with employee wants and affordability to create a good, solid time-off policy,” says Jen Teague, a Staffing & Onboarding Coach for small and growing businesses.
“An employer needs to do some math on how much it will cost to offer time off, knowing that less work is getting done. They also have to take into consideration company needs such as scheduling conflicts, seasonal changes, and other factors. Lastly, an employer needs to hear what employees want. Most of the time, they just want time to spend with family or take a vacation, so an employer should try their best to accommodate that.”
When looking at what your time-off policy will cover, it’s important to consider what you will and won’t cover in regards to both mandatory and voluntary time off. At a minimum, providing your employees with paid holidays and vacations is a basic benefit that isn’t too costly to businesses. As you create a program, be sure to balance the benefit to employees with what you can afford to provide in both compensation and productivity loss when an employee is out of the office. At the same time, don’t forget to consider what your competition provides—if your time-off policy is too limited, you’ll feel the expense when you lose top talent.