Must-Do Strategies: Steps to More Flexible Time Off Programs

The following article was originally posted on the Mercer US Health News blog. You can find this article along with more health news content here.

By Rich Fuerstenberg, Senior Partner, Health, Mercer and Richard Cooper, Life, Absence and Disability Consulting

Work flexibility and time off are more important to employees than ever before. Many employers made changes on the fly to their time-off programs during the pandemic. Whether you did or didn’t, now is a good time to take stock of your programs and policies and look for opportunities to improve competitiveness and ensure compliance. You should also be prepared to answer questions about a 4-day work week -- because if you haven’t gotten them yet, you will! Meanwhile, before we get sidetracked thinking about ways to spend that extra day off each week, here are four things employers can do to add flexibility to their time-off policies right now.

If you haven’t yet made the move to a PTO plan

Many employers have found that they are better able to address the time-off needs of a diverse workforce by combining vacation and paid sick leave into a single paid-time off (PTO) plan. Not only does this approach give employees more flexibility in how they use their time-off, but it can also streamline administration, eliminating the need to track whether a specific day off is because an employee has a minor illness or because they’re extending a long weekend. In 2021, 68% of employers responding to Mercer’s Absence and Disability Management Survey offered a PTO plan combining vacation and sick days.

Review your paid holiday schedule

Most employers offer a mix of fixed and floating holidays. Rebalancing the mix with fewer fixed holidays and more floating holidays provides additional flexibility. Floating holidays can also help advance diversity, equity and inclusion goals by allowing employees to observe the holidays that are important to them instead of just the ones selected by their employer.

Allow PTO to be converted to cash

The practice of allowing employees to sell excess PTO time during annual enrolment in exchange for cash has been around for years. Now vendors have emerged in the market that can support the conversion of PTO to cash throughout the year, or to cash-like benefits such as student loan payments or contributions to the cost of a vacation. These platforms allow employers to set guardrails that limit the amount of time that employees can sell as well as ensure that employees use some of their PTO before they sell it. For example, the platform can be programmed to prohibit selling any time off until the employee has taken at least two weeks of PTO.

Unlimited PTO can support the way people work now

Once seen as a niche benefit, unlimited PTO demonstrated its advantages during the pandemic: It allowed for multiple quarantines and avoided large accruals of unused vacation. In our 2021 survey, one out of five respondents had implemented unlimited PTO for some portion of their employee population, and a number of household-name companies – including Microsoft and Goldman Sachs – have recently announced a move to unlimited PTO. We will continue to monitor this trend to see if it continues as employers shift their focus from the unique pressures of the pandemic to enhancing flexibility.

In our 2021 survey, 70% of employers reported that the amount of time off employees took was the same as it was under their prior accrued policy. We trust that number will hold or increase now that employers have better tools and more experience in managing unlimited PTO programs. One of the more innovative strategies we’ve seen to prevent time off usage from dropping after implementation of unlimited PTO is to actually provide cash incentives to employees when they take a vacation under the unlimited PTO policy.

Parting advice

In your longer-term planning for the benefit program, be sure to consider employees’ desire for more flexibility in time-off benefits. Paid time off is no longer a one-size-fits-all benefit; it’s more like a Swiss Army knife with different tools to meet the unique needs of an increasingly diverse workforce. The amount of time off needed can vary significantly from employee to employee – and it can vary from year to year for any individual employee. Paid time off policies need to change to be more responsive to those needs.

This blog post elaborates on one of the six “must-do” strategies Tracy Watts shared in her post, 2023: The Year to Get Creative with Strategic Planning. Check out the other articles in this series: Optimize Benefit Spend and Minimize Cost Shifting; All Paths Lead to Value-Based Care, Prioritize Support for Substance Use Disorders, Close Benefit Gaps with Meaningful Choices.