Moving Toward Integrated Paid Time Off Programs
PTO programs can be one way to provide employees with adequate leave while cutting down on absenteeism and costs.
Tough budget situations force governments to get creative about how to save money while keeping employees happy. According to a recent survey conducted by the International Public Management Association for Human Resources (IPMA-HR), a growing number of public-sector organizations are turning to integrated paid time off (PTO) programs as one way to do so. Rather than allowing employees to accrue various banks of leave for vacation, illness and bereavement, employees each have a single block of paid leave that they can use however they want.
The benefits of the program, according to survey respondents, include reduced unscheduled absenteeism and administrative burden, improved morale, cost savings and a competitive advantage in the job market.
One concern expressed is that employees may take more time off since they do not have to give a reason for leave, leading to lost productivity. But Bruce Lawson, managing director of Fox Lawson & Associates (the organization that assisted in the IPMA-HR study), argues that governments actually save money by paying out leave at current wages, instead of having employees save their leave and have it paid out at a higher wage when the employee leaves the organization.
To find out a bit more about the challenges and benefits of implementing an integrated PTO program, I spoke with two HR professionals: Erin Niehaus, the HR coordinator in Hays, Kan., which transitioned full-time employees to an integrated PTO system in 2006; and Margaret Schmitt, HR director for Lynchburg, Va., where the city moved all part-time employees to integrated PTO in 2008. Their edited and condensed responses appear below.
What sparked a move from separate leave banks to an integrated PTO system?
Erin Niehaus (EN): One of the main reasons for the transition was at the time we had so many types of leave: vacation leave, sick leave, funeral leave, family leave. It was just easier to lump it all into one so that if you're gone, you're taking PTO. No one has to ask, "Why were you gone?"
Margaret Schmitt (MS): Part-time employees received many buckets of leave … and their carry-over rates were the same as full-time even if they worked a small number of budgeted hours…. We looked at PTO in the context of our leave overall, and decided to use the part-time employees as a pilot and see how well it goes and whether it is feasible for full-time employees as well.
How long did the transition take?
EN: The transition began in early 2005 and it was in place by 2006.
MS: It took us six months to do the research and develop proposals. We allowed about a year and a half for the full implementation.
What happened to employees' unused leave after the transition?
EN: Employees were paid out for ... a percentage of the sick time based on how long they've been here. They were paid out in a lump sum form.
MS: [During the implementation period] we gave employees time to use up some of their leave so the transition didn't have a huge negative impact on them.
What happens to employees with a long-term illness if they max out their PTO?
EN: Through the Kansas Public Employees Retirement System (KPERS), employees receive long-term disability after six months. The worry was: What happens until then? The city decided to purchase short-term disability for all employees. Employees receive this after two weeks.
MS: We ended up having two kinds of leave banks: paid-time off and catastrophic. We moved extra employee sick leave into the catastrophic bank for absence or illness for a week or more. We do not offer short-term disability for any of our employees, so they essentially use the catastrophic bank as short-term disability. Initially, we took the sick leave people hadn't used after the transition to populate the bank, and now at the end of each calendar year, if employees have unused hours, they can add those to [their personal] catastrophic bank.
What concerns did employees express before the transition?
EN: At the beginning, there was some fighting, but really I think the short-term disability helped.
MS: Some of the part-time employees are very long term. That did create some of our challenges in transitioning to this program because they have had the benefit of a higher amount of leave for a long time. The biggest thing for the long-term employee was they felt somewhat devalued because their hours were being reduced, and they had lower carryover and payout limits than they had before.
How do employees feel about the program now?
EN: Now, most employees like it. First off, you don't have to tell anyone that you're sick. We don't care why you're gone. It's just PTO. The people who don't get sick as often, they get to use all of their time and don't just have to let it sit in the sick bank. And for supervisors, there are less people calling in pretending to be sick when they aren't.
When I get new employees, they love the integrated PTO because they are often younger and don't get sick very often. I think they like the freedom. They don't have to tell us why they're gone. We do still separate between scheduled and unscheduled leave so we can track when people are abusing the system and choosing not to come in without warning us.
MS: There are still a couple of people who are not happy and who have never been happy. Otherwise, most people have been happy, they have accepted it. We have gone back and looked at the program, as we promised to do, to see if there was a huge negative impact, and whether it impacted hiring or turnover. We cannot indicate that the leave leads to any problems in that regard.
Has Lynchburg determined whether the part-time employee pilot program has yielded the results necessary to transition full-time employees to integrated PTO?
MS: While there is still value in moving full-time employees to a PTO bank, the transition of getting from here to there is not something we've been willing to take on yet. As our difficult budget situations continue, that might be one of the difficult decisions we have to make.… We'd have similar challenges, but they'd be magnified by 10 due to the size of the full-time workforce.
For next month, I’m taking a look at differing studies on public and private sector compensation, and more specifically, how job security plays into their results. The question we're posing to you: Can you put a monetary value on job security? Please send your thoughts to me at email@example.com.