2020, the year of the forced staycation. While some people have been able to take real vacations this year, those of us with multi-generational families, who are immunocompromised or have other concerns about our health and welfare have had very limited options. In the world of Total Rewards, this creates some real concerns.
There is the basic issue of ensuring people have the time and privacy to recharge (I discussed “performance fatigue” in a recent article). There is also the issue of “use it or lose-it” programs that may result in people working more days than usual and losing their PTO at the same time. For those companies who pay out unused PTO, there is also the possibility of a PTO payoff cliff. Add in the loss of cachet for the “unlimited PTO” policy. Finally, there is the very real issue of thin staffing resulting in working via email, phone or zoom calls, even when someone is “on vacation." These issues must be addressed, but there is no one-size-fits-all solution. (And does one size ever fit all?)
We pay people to take personal time because it is good for them and businesses. Happy, relaxed, refreshed humans are simply better employees and coworkers. Take a look at faces on your next zoom call or slack. Do people look excited and raring to go? Do they look a bit like they could use a day or two off? I am betting it's the latter.
The "use it or lose it" crowd has it especially tough. More than half the year has passed us by and it seems like it has taken only 39 months. Robert Half did a survey in May 2020 showed that fewer people were expecting to take summer vacations. They intended to push their vacation into later in the year when things were more settled. But things are not more settled. Many vacation destinations are actually among the worst hit over the past two months. Those delayed vacations are very quickly going to become no vacations. How will your hardworking, lean staff respond when you announce that they are losing both their time away AND their associated pay? I am betting that “use it or lose it" will become “pay them or lose them.”
For companies who are already running on empty, paying out unused vacation in early 2021 may be the final nail in the coffin. These expenses are real and must be accounted for when determining other components of pay in the next few months. Read on to learn some possible ideas.
Companies with unlimited time-off already know that their staff members tend to take less vacation. This is an easier problem to address, but no time off means a strain on productivity and mental health. Even these companies may need to build something new to weather the storm.
The last issue is becoming one of the most common problems. Even when people are on “vacation” we expect them to be available. This has never been truer than now. Teams are running lean. All hands have been called to be on deck. But the storm has not calmed, and we really need to let people get some rest before big mistakes or permanent leaves start becoming commonplace.
So, I have set a kind of dark background, what can we do about all of it?
The easiest change for many companies is to change the rollover rules. Allow this year to carry forward rather than killing that PTO. Allow this year to add to next year, even when the standard policy is to pay them out. Provide an additional week or two or PTO even for companies with “unlimited” time-off. But what if the box were…much, much different?
Many companies will hard-pressed to meet their annual incentive plan goals this year. You may save money by paying these bonuses, but companies with some cash may choose to fold in unused PTO as an additional incentive payment at the time of bonus.
Could we allow employees to exchange their unused time-off for some other element of total rewards? Has your stock performed well and would employees like some extra stock options or PSUs? Can your ESPP be amended to allow for unused PTO to qualify as compensation for the next purchase date? Is there a particularly useful benefit that people generally forego, but maybe a useful trade-in for vacation bucks? Can you cover the cost of travel arrangement services to help employees take advantage of their vacation time? Can you offer a 4 day work week in exchange for the paid time that will otherwise be lost to employees? The possibilities are out there.
WOW! This is getting long. The editor is going to be annoyed, so let’s wrap it up! PTO is a valuable component of your Total Reward offering. We are experiencing something that has never happened before. It may be time to do something with PTO you have never tried before. I’d love to hear some of the things your company is doing or discussing.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He is a “Compensation Futurist” who works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.
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