Two Sides: Should Employers Pay Out Unused PTO at the End of the Year … Or Not?

November 13, 2019
Publication
MRA Edge
Benefits
Engagement & Retention
Total Rewards
Wage & Hour
Read time: 2 mins

Should employers pay out unused personal time off at the end of the year… or not?

In many organizations, personal time off, or PTO, has evolved from separate silos of vacation time, personal time, and sick time to one chunk of hours or days that employees have available to use in a year. Some companies have a “use it or lose it” policy, while others let employees roll over some (or all) of their unused time to the next year. But what about getting paid out at the end of the year for remaining PTO? Is that a good idea?

We talked with two MRA experts to cover the whole story.

 

Heidi Wolverton, HR Business Advisor

It’s a No-Go for Paid Out PTO

  • PTO is a wellness benefit and employers need to encourage people to use it throughout the year. Getting away from work is good for the body and mind, and when used, employees return to work rested and recharged, able to perform at their highest capacity.
  • It shouldn’t be considered compensation, but rather a benefit to use. It’s not a savings account. A big check at the end of the year can be enticing but that’s not the purpose of PTO.
  • It’s an uncommon practice. According to MRA’s recent policy and benefits survey, only 21 percent of employers are paying out unused time at the end of the year — proof that it’s not the standard.

 

Maureen Siwula, SPHR, HR Business Advisor

It Pays to Pay It Out

  • Vacation time on the books is reduced. Paying out PTO annually will lessen the burden when long-term employees leave the company who have accrued a ton of time off over the years.
  • Not everyone has the discipline to save money, and this can be a way for employers to offer that option. Employees can receive their PTO pay how it works best for them. For some, cash is more valuable than paid time off.
  • It’s part of the total compensation program. Paid time off is part of how much your employer spends on you. It can be seen as another level of flexibility and an attractive workplace benefit.

Read the full issue.