After acquiring five companies in the past five years, Monster Worldwide Inc. found itself with a hodgepodge of policies governing vacation, personal, and sick days. “They were a nightmare to administer,” recalls Greg Limoges, vice president of compensation, benefits, and human-resource information systems for the online career network based in Maynard, Massachusetts. Monster’s solution: a paid-time-off bank.
PTO banks — which combine vacation days, sick leave, personal days, and, in some cases, holidays, into one lump of time that employees can use for any reason — are gaining popularity with employers. Among the companies that have moved to install PTO banks in recent years are insurance giants CNA and The Hartford Financial Services Group Inc., and Covenant Health System, a health-care concern in Waterloo, Iowa. Mercer Human Resource Consulting in New York last year surveyed 536 midsize and large companies and found more than 1 in 3 now offer PTO banks.
Many CFOs favor PTO banks because they help trim the liability their companies are required to carry on the books to cover accrued vacation. That’s because the new plans typically come with limits on the number of days employees can build up in the banks or roll into the next year. Martin Kelleher, CFO of Monster North America, says the positive accounting effect was a key advantage of the new plan. “It minimizes the financial exposure when an employee leaves the company,” says Kelleher. “The days they can carry over are now capped.”
PTO banks also help streamline benefits administration and cut the cost of absenteeism. At most companies, paid time off is the most expensive benefit they provide, eclipsing even health care. Scheduled time off accounts for more than 10 percent of payroll, according to Mercer. Unscheduled absences account for another 4 percent of total payroll, the consulting firm says, though it believes many companies underestimate the true cost of unscheduled absences.
Instituted three years ago, The Hartford Financial Services Group’s PTO bank enables the insurer to more effectively control the process of workers taking time off. Previously, managers were responsible for tracking workers’ absences in their departments. “Some tracked the information more closely than others,” says Karen Macke, senior vice president of compensation and benefits for the insurer. Now absences are reported through local departments, by way of a PTO attendance-tracking tool.
Monday Morning Flu
PTO banks are proving popular at hospitals and other workplaces where attendance is crucial. Placer Electric Inc., based in Citrus Heights, California, installed a PTO bank three years ago after struggling with a bout of questionable absences every December. Before that, the electrical contractor had provided its employees with 10 sick days a year. Employees who didn’t use their full allotment were allowed to roll up to 80 hours into the next year. As a result, every year after Thanksgiving, Monday morning “illnesses” were common, making it difficult for managers to schedule tasks and complete projects.
Placer’s PTO bank eliminates the Monday-morning calls, enabling the company to budget manpower more effectively. Valerie Kravchenko, director of human resources, says the PTO “takes the mystery out of it.” Now, employees don’t have to lie about being sick to cash in on their benefits. They also tend to give more notice about upcoming absences. Placer doesn’t have a written policy governing how much advance notice it needs before workers take a personal day, but it asks employees to use the benefit responsibly.