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Eliminating a PTO plan for one in which there is no formal PTO offered

eliminating ptoWe are exploring moving away from a PTO plan to one where our employees would have no set time off, no formal tracking of time off, no accruals and no payout when they terminate.  As professionals, they are expected to get their work completed and manage their time off accordingly.  Does anyone have any experience with this type of plan, transition to this plan and perhaps language to put in an Employee Handbook?

Answers

david waltz
Title: Assistant Treasurer
Company: Integrys Energy Group
(Assistant Treasurer, Integrys Energy Group) |

Bruce,

Very interesting concept I have not heard of before (except in the case of business owners).

To pull this off there will need to be a lot of mutual trust. From the employee's view - if I plan 5-days off will my boss throw more work at me since I have that much time free?

And the employers - I haven't seen Joe or Sally for two months, I wonder what he/she is up to?

Another question would be whether this creates a recruiting/retention advantage or disadvantage?

It simplifies accounting, there is no year-end accruals and liabilities, and the elimination probably allows some liabilities to hit the bottom line?

Bruce Ficks
Title: CFO
Company: Value Financial Group
(CFO, Value Financial Group) |

Hi David,

From my point of view, department managers still need to go the job of managing their reports; no change from before. Employees need to be professional and managers need to treat employees as professionals. It puts the focus more on performance and results versus recording and tracking time off.

It may, however, put some managers in a more uncomfortable position: they can't deny time off and blame lack of accrued time. Puts the focus more on is/how the work getting done.

We are hoping that this creates a recruiting/retention advantage, as it would seem to reinforce the culture of performance and professionalism.

david waltz
Title: Assistant Treasurer
Company: Integrys Energy Group
(Assistant Treasurer, Integrys Energy Group) |

Bruce,

Thanks for the response!

I am quick to download a whitepaper, am constantly with a book (or two) in my briefcase, and haunt discussion boards such as this one (when I'm not writing posts for my Treasury Cafe blog, of course), and cannot say I have run across the concept, so I too am interested to hear what experience others might have with this.

Bryan Frey
Title: VP Finance/Corp Controller
Company:
(VP Finance/Corp Controller, ) |

My last company did this for execs. No PTO, just take whatever vacation you want. We kept the other employees on a pretty standard PTO program. For execs, as you might expect, it was a non-issue. We hardly took vacation anyway. For the company, we got to not pay out PTO when folks quit or were let go. And I'll tell you that this was not great for the employee, but nice for the company. It's no secret that unpaid PTO balances are like a "shadow" severance. This got rid of that effect for the executive team.

Patricia Hickey
Title: Chief Financial Officer
Company: CCS
(Chief Financial Officer, CCS) |

We instituted this for our senior people. You need to be careful that it does not trigger an "unlimited PTO policy" when it comes to termination. Since there is nothing tracked, someone could potentially sue for a large PTO payout stating that it was understood this was unlimited. We had to change our policy to put limits back on it to avoid this potential liability.

Peter Skinner
Title: Director of Finance & Administration
Company: Monterey Regional Waste Management Distr..
(Director of Finance & Administration, Monterey Regional Waste Management District) |

I did this at a Valley software company in the '90s. Made it policy for the entire company - mostly consisting of highly self-motivated professionals (software dev, sales, marketing, medical-trained...) It was one of the most successful differentiators we used in creating (and providing evidence for) a culture based on trust and respect. A few employees grumbled during the transition from tracked to un-tracked balances, but it was well worth it. Not sure what accounting/legal regs may have changed to impact this today, but I hear about more and more companies considering the same.

Anonymous
(CFO) |

We have a tracked system that people here in VA think is key. Too hard to manage abuses without it. Also companies here are trying to get the most out of employees. So just because a highly effective employee is able to do the job assigned in 35 hours, companies want to see extra value for any additional hours available, not see the employee take 5 hours off to play.

We have a very paternalistic environment, though.

Larry Leser
Title: Chief Financial Officer
Company: Caffe Classico Foods LLC
(Chief Financial Officer, Caffe Classico Foods LLC) |

I would suggest checking with labor counsel for the states where you have employees if any of the employees are non-exempt/hourly. I worked with a company that implemented what you are exploring and they decided, based on labor counsel, to record a liability of 160 hours for each non-exempt employee in California. They are being very conservative but California is a state where you can't have a use it or lose it plan for vacation.

david waltz
Title: Assistant Treasurer
Company: Integrys Energy Group
(Assistant Treasurer, Integrys Energy Group) |

I ran across this blog post that says Netflix has that policy with a couple of links to other sources discussing pros and cons.

http://www.qualitylogoproducts.com/blog/attracting-talent-increasing-company-loyalty/

Bruce Ficks
Title: CFO
Company: Value Financial Group
(CFO, Value Financial Group) |

Thank you David. Some great links/info. I say if you treat people as professionals and they will ask like professionals. The few individuals that don't act like professionals need to be managed no matter what the policy is.

Kirsten Clark
Title: President
Company: Professional Small Business Management, ..
(President, Professional Small Business Management, Inc.) |

For payroll and bookkeeping purposes you no longer need to accrue the PTO. One suggestion though is to put a short term disability policy in place for the employees in case of an illness or injury that would keep an employee out of work for more than 3 weeks.

Topic Expert
Shannon Mathews
Title: Controller
Company: Aldrich Services LLP
(Controller, Aldrich Services LLP) |

You also have to think about this on the other side. Forcing your people to leave for a while. We found that too many of our staff weren't taking even a minimal vacation as they always felt they had too much to do. How can you take time off when there isn't enough time to get your job done as it is. We were having certain people burn out quickly in some instances if they were managed by one of these individuals because a guilt factor was involved with taking the vacation. How much is really appropriate and how much isn't. You have the people who don't take enough and the people that take too much. However if you have a good staff this works very well in the end.

Though do look into the rule for each state. As indicated above California makes it almost impossible to have an unlimited policy.

Anonymous
(none ) |

Our company has gone from an accrued time off for vacation to unlimited vacation time (as long as management approves and your work is getting completed). However, until you have taken all of your prior accrued time off you do not begin using the unlimited program. This is a CA corporation with offices throughout the US. Is this right?

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