Best Practices in HR

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  March 22, 2019

Unlimited time off: paying former employees for unused PTO

Imagine that your employer keeps a reserve of gold coins in a conference room down the hall. According to the employee handbook, employees are entitled to unlimited gold coins. The employer is cool with that, they don’t even track who’s taken what. That’s right. You can walk into that room, grab as much gold as you can hold, not tell anybody and, in turn, nobody tracks it. Tomorrow you can do the same thing. And the next day. Back to reality now. Switch out gold coins for paid time off and you essentially have what many employers consider to be an employee benefit: unlimited time off.

All that glitters isn’t gold

Amidst the recent wave of layoffs in the journalism industry one company in particular, BuzzFeed, was blasted for trying to weasel out of paying former employees for unused paid time off. While the company ultimately did right by their former employees by paying them out, it laid bare a bait and switch scheme employers use to save money while appearing to be progressive workplaces. The scheme is called unlimited time off.   

Unlimited time off is great in theory: adult employees are entrusted to decide when and how much paid time they take away from work. Employers lovingly pay for that time off as acknowledgement for the hard work employees put in. Everybody is happy and there are palm trees.

In practice however, most employers aren’t interested in employees taking more time off, and that’s exactly why unlimited time off policies are so alluring; with no actual policy attached, unlimited time off can play to the house’s favor, because employees take less time off. While there are myriad reasons why, it mostly boils down to employers creating a non-finite resource of an otherwise well-structured benefit.  There’s no urgency for employees to take it, and they’re left judging one another for doing so. As for management, they’re tickled with the results; more work, less pay, less taxes.   

It’s the law, son. Just kidding.

Inadvertent or not, former BuzzFeed employees got hosed and the only means of redemption for them appears to be that their former employer worked across state lines which means some former employees, namely those in California (where a pay out is mandated by state law), got paid while residents of other states ultimately wouldn’t have been paid were it not for their activism.

Since most states have no enforceable point of view on the matter (California being an exception), former employees rarely have the means to demand pay for the unmeasurable amount of time off they may or may not have been entitled to from an employer that may or may not offer time off at all. See what I did there? For example, in Illinois there is, in fact, a recommendation that employers pay former employees for accrued, unused paid time off. It’s mostly toothless though, as there’s no law stating Illinois employers have to actually offer accrued time off. That’s the regulatory sound of one hand clapping.

Creating structure in the realms of the unlimited

Unlimited time off without practical guardrails is, simply put, a way to lure job prospects into a workplace. Once they’re in, they’ll quickly realize the benefit is nothing more than smoke and mirrors.

So what are some practical guardrails employers can use to comply with what an ethical time off policy?

  • Unlimited time off should be offered in tandem with minimum time off; a number of days (start with 18) that employees are required to take leave from work. That minimum number of days off ensures employees get away from work, and it gives the employer a benchmark for accruals when someone leaves the organization.  
  • Determine a time off ceiling – how much is too much? It’s a question employees have, and one that employers should know the answer to. If you’re fine with fifty days, but one hundred is a problem, fine, let everyone know.
  • Track it. Time is money, and time off is an expense, so create a tracking and approval process, because paid time off costs a business money regardless of how little employees use. Any business interested in their money should know how much money they’re paying for employees to not work.    
  • Write it all down, share it, and make sure employees understand your company’s commitment to keeping employees engaged at work through regular breaks from it.  

Note that employers using unlimited time off as a compensation ploy will scoff at these suggestions, because they do three things: they ensure employees take time off, they put oversight back onto management where it belongs, and it holds employers accountable for paying employees for earned, unused time off.

There is such thing as good, unlimited time off

Employers should be interested in employees taking time away from work; it builds a more resilient team, and more dedicated team members. Employers who offer unlimited time off should be lauded in that regard, but they need to go the whole nine yards and put their money where their mouth is, via policy. Good time off policy takes more than an “All you can eat time off” sign on a company’s door to build responsible, well balanced employees. It takes design, practice, and the desire to do what’s right for employees past and present.   

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