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3 Ways to make PTO work for your small business

How to make PTO work for small business

Generous paid time off (PTO) policies can translate into better employee recruitment and retention. But for small businesses, offering PTO benefits that compete with large corporations can be challenging.

“[Yet] without work-life balance, employees can burnout and quit. Or worse, burnout and stay employed, dragging the company down with them," says Chad Sorenson, president of the Jacksonville, FL chapter of the Society of Human Resource Management (SHRM).

“Planning and cross training are keys to making PTO work in an organization where every position is critical," Sorenson says. As a small business owner, creating the optimal PTO policy for your business and your workforce may require some trial and error, but there are some best practices to get you started.

1. Consider a “two-bucket" approach.

Employers often lump vacation time and sick time together in one PTO bucket, but doing so may have negative consequences. For example, if an employee wants to save his PTO for a vacation, he’s more likely to come to work ill, which can prolong his illness and put coworkers at risk. However, with a designated number of sick days, employees may be more willing to stay home and take care of themselves when they're ill.

2. Supplement PTO with creative alternatives.

"For some companies, telecommuting can be a creative alternative to PTO," explains Sorenson. “If managed appropriately, telecommuting can allow employees to provide needed support to the office while maintaining their obligations at home.”

Certain types of work are less ideal for telecommuting and other non-traditional work arrangements. But if your industry is conducive to workplace flexibility, you might consider offering it. One approach is to consider a policy that allows eligible employees to work from home one day per week on staggered days. This way, the office will always be staffed and employees can enjoy the benefits of working from home on a weekly basis.

3. Encourage workers to “use it or lose it."

American workers are notoriously bad at using their PTO compared to workers in other developed nations. In fact, a recent survey found that more than half of the workers surveyed—55 percent—did not use all of their PTO in 2015.1

Paying out for unused vacation days may contribute to the problem of overworking. On the other hand, encouraging employees to take vacation can be good for business. According the same survey, the vast majority (84%) of managers agree that when employees take time off, they return to work with improved focus and creativity.

Also, keep in mind that if a company's PTO policy allows vacation days to roll over from one year to the next, it can become an expensive liability for employers. Not only can this lead to extended absences of essential employees, but some states and jurisdictions require employers to pay cash for unused vacation time when an employee leaves the company.

Communication and equity are key

"When deciding what type of PTO policy to implement, employers can start by directly asking their employees what they want," Sorenson says. "What is important to them? What can provide the most impact? Businesses should view benefits as an investment in their employees."

It’s also important for employers to clearly articulate the company’s PTO policy and any changes. If there are exceptions, make it clear to whom they apply and why. Here are a few specific things your PTO policy should clearly explain:

  • Who is eligible for PTO
  • How much PTO will be offered
  • How PTO time accumulates
  • How PTO can time be taken (for example, in hour increments, or as full days)
  • If unused time can carry over from year to year, and if so, how much
  • If the company will pay out for unused days

Most importantly, a company's PTO policy should be fair. "A good practice is to approve requests for time off in the order they were received," says Sorenson. "If an employer must deny a request for time off, they should have a good business justification for it. The goal is to maintain goodwill, while still keeping the best interests of the company at hand."

Company culture matters

Many employees don't take vacation because they simply feel they have too much work to do. Creating a culture that prioritizes work-life balance must start from the top. So, while your small business may not be able to offer unlimited vacation it is possible to get it right when it comes to a culture.

“Mid-level managers must also ensure the balance is happening and call it out when it's not," explains Sorenson. “Too often, company initiatives start at the top but get lost in translation when they trickle down through the company. Not only do managers need to have balance, they need to expect it from their teams." Managers should talk to their employees about the importance of taking a vacation, and make sure they feel supported in stepping away for a few days without negative consequences.

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