Is money better than free time?

When Matt Cadwell joined the human resources department of digital signage company Stratacache in 2017, he realized there was a problem. Thanks to a generous vacation policy, employees had accumulated paid time off (PTO) hours that they had not used. When they left, Stratacache must have written big checks.

So Cadwell turned to PTO Exchange, a platform that allows employees to exchange their unused PTO for cash, donate it, or use it for travel or training expenses. The most popular program is the cash-out option, he says, especially during the holiday season or just before summer when people want to increase their travel and gift budgets. Cadwell says the only challenge he encountered was communication.

“When an employee thinks you’re tampering with their vacation, people can go crazy,” he says. “It’s important to clarify that it’s optional and you don’t have to use it if you don’t want to.”

American workers care deeply about their PTO. According to a 2020 report by Gartner, this is the perk they value most after base pay. In addition, workers are 70% more sensitive to a change in PTO than they are to wages.

At the same time, many aren’t using their full PTO: Last year, Americans left an average of 5.6 vacation days on the table. What happens to unused PTO depends on what state you live in. About half of U.S. states have laws that require employers to pay for accrued PTO when an employee leaves, but some allow employers to waive payment for PTO if the employee has left after less than a year of work.

Rob Whalen, co-founder of PTO Exchange, says he started the company after he and a group of colleagues received large cash payments for their unused vacation days after leaving Cisco. “We were talking about all the things we could have done with the money, like putting it in our 401(k) or taking a family vacation,” he said. “It was light bulb time.”

According to Whalen, PTO Exchange works with companies to create a communication strategy around employee options and to create policies to ensure that employees do not cash in their entire PTO, such as not offering receipts only to employees who have already used two weeks of PTO. He points out that when employees are compensated, they should view their total compensation as salary and PTO. Each time an employee loses his PTO, he loses part of his remuneration because his employer has gained more productivity thanks to him.

Time is money. Free time is priceless

The idea of ​​trading PTO for cash is a relatively new space, says Rich Furstenberg, senior partner at Mercer. He notes that giving employees the choice to cash in the PTO creates tax implications for the employee and that the tax law is murky. As such, the idea didn’t have much success before the pandemic. However, during the pandemic, when travel options were closed, employees began accumulating PTOs. “It’s not common, but it got employers interested and wanting to know more,” he says.

Gartner analyst Tony Guadagni finds the idea of ​​exchanging PTO for other perks such as cash an intriguing solution to the problem. Since most companies have several different systems to manage their PTO and payroll – systems that may not communicate with each other – he points out that many companies would need a third party to manage a takedown. of strength. He adds that this could be a major asset in an environment where employers are looking for ways to retain talent and themselves from the competition.

However, he fears the program could subtly discourage some employees from taking vacation days in an environment where burnout is already high. “It’s definitely a solution for some people, and flexibility for employees is important, but it’s also important for organizations to foster a culture where people feel comfortable taking their full PTO,” he said. -he declares. “I’m concerned that offering a choice creates a disincentive to use PTO.”

According to Furstenberg, a larger question is how to ensure the PTO has value for employees in a world where there aren’t many travel options. He points out that there are other options, such as deferring time so employees can take longer trips once the world opens up. “Exchanging PTO for cash is one of many ideas that should be included,” he says.

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