In 2022, employees expect their benefits to address flexibility as much as they expect health and retirement benefits. Many employers are starting to realize that flexibility will affect the future of their workforce, prompting them to consider incorporating remote and hybrid work options on a permanent basis. Employees are looking for flexibility that allows them to attend their child’s extracurricular events, go to their pet’s veterinarian appointments or simply get home in time for dinner. In addition, employers are being asked to think outside the box about all types of benefits because one-size-fits-all arrangements may not work for their environment as they once did.

Paid time off (PTO) is a common, yet overlooked, benefit capable of providing flexibility throughout the year. Employers can structure PTO policies in various ways: by using a bank of hours or days, defining each type of benefit by allotted time off or implementing a combination of both.

Employers are using their PTO programs to solve new challenges brought on by COVID-19 and the increase in remote working options. PTO benefits can be used to:

• Combat wellness, stress and mental health–related issues
• Retain existing staff and support collaboration and teamwork by helping with workload and workflow practices
• Attract new employees, perhaps outside of the normal hiring geographic area
• Develop more comprehensive absence management policies
• Reassess diversity, equity and inclusion (DEI) strategies.

Benchmarking of PTO benefits

While PTO plans can generally help with the above issues, how do employers typically design their PTO benefits? Statistics indicate that employees generally believe that PTO benefits are highly sought-after and important to them, but how employers structure their programs can support employees while encouraging them to use their time off as needed during the year.

According to the International Foundation’s Employee Benefits Survey 2020, around 50% of employers use a separate paid vacation plan, 42.8% of employers use a PTO bank and almost 5% have an unlimited vacation policy.

In HUB International’s 2021 Workforce Absence Management Survey, half of respondents said they manage sick, vacation and personal time separately, while the other half combine all time off into a PTO bank.

Zywave’s 2021 Human Resources Benchmarking Overview found that 28% of employers reported offering 11-15 PTO days. These employers are now considering changing their PTO program to address increasing requests for flexible PTO.

In early 2021, WTW released its 2021 Emerging From the Pandemic Survey. Roughly half of employers changed features of their vacation and sick pay benefits, and over half (56%) changed the features of their PTO program due to the pandemic. Fifty-three percent of employers made changes to increase the annual carryover limits for their PTO, and 59% did the same for their separate vacation and sick plans, making it so employees aren’t losing as much vacation at the end of each year. Employees surveyed indicated a preference for more generous PTO benefits at the expense of other benefits.

Next Step for Employers

Flexible PTO offerings can attract new candidates, avoid burnout and retain star employees by becoming a benefit that allows them to stretch outside of the 9-5 lifestyle grasp. Whether your organization is developing a new policy or updating an existing policy, here are a few considerations for employers:

• Determine whether any state or local laws address vacation pay or use-it-or-lose-it rules such as those included in Paycor’s PTO Payout Laws by State 2022
• Encourage input from those managing heavy workloads, projects or busy seasons
• Include a communication plan to inform employees of any new or changing requirements
• Ensure remote workers have easy access to tracking and policy information.

“Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.”

Anne Newhouse, CEBS
Information/Research Specialist at the International Foundation of Employee Benefit Plans

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