The Administrator’s Desk: Dealing with PTO Time

At Palmetto Surgery Associates in Seneca, S.C., rewarding employees with paid time off isn’t just about granting them a few weeks leave each year for holidays and illnesses. It’s about giving them choices.

During their first two years of service, the twelve employees at the practice begin with five days of annual vacation and six days of sick leave. At year three, they keep the same number of sick days but double their vacation time. “We really just add them all together so if the employee is not sick they can use those days for more vacation,” says practice administrator Melinda Paluzzi. “It gives them a lot more flexibility. We never ask for a doctor’s note if they call in.”

Like Palmetto Surgery Associates, practices across the country are building flexibility into their paid time off (PTO) policies. Many are replacing the age-old system of earmarking a specific number of days for vacation, personal, and sick leave with a collective PTO bank that employees can use at their discretion. The number of PTO days given are generally based on years of service.

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“PTO policies are a very positive trend because they give the employee more say in how their time is used,” says Dan Zuhlke, vice president of human resources at Intermountain Healthcare in Salt Lake City and vice president of the American Society for Healthcare Human Resources Administration. “Historically in healthcare, we had banks designated for vacation and sick time, and what we found is that sometimes mothers with young children would have to lie to take a day off because they didn’t have a bank of time for that.”

There are also advantages of opting for PTO policies from a business perspective. First, they eliminate the administrative chore of having to track the reasons for employee absences. They also help minimize unscheduled absences - a major drain on productivity - since employees are no longer forced to call in sick to attend to personal matters.

A 2007 survey on employee absence across all industries for CCH, a human resource and employment law firm based in Riverwoods, Ill., found that personal illness accounts for just 34 percent of unscheduled absences, while 66 percent are due to other reasons, including family issues (22 percent), personal needs (18 percent), stress (13 percent), and entitlement mentality (13 percent). The survey also found that most people perceive paid leave banks to be the most effective absence control program.

But PTO plans are not a silver bullet. They can also create problems that require careful oversight by practice administrators. Some employees, for example, have trouble managing their paid days off, blowing through them in the first half of the year and setting nothing aside for the flu season in September or the holidays in December. That forces you to provide additional days off when they get ill (albeit unpaid), which affects coworkers and office productivity.

Zuhlke says it’s wise to encourage employees to keep at least five days of PTO in their bank at all times, giving them a reserve to draw from should they suddenly fall ill. “Even though their vacation and sick time is all rolled into one, this is still a bank that must be used for illness, so they can’t use it all up,” says Zuhlke. “There has to be some education there.”

When employees start viewing all of their PTO as vacation days and then come into the office sick to avoid taking a day off, employers call the phenomenon “presenteeism.” CCH found that more than half (56 percent) of the employers it surveyed reported that presenteeism is a problem in their organizations, up from 48 percent in 2005 and 39 percent the year before. “The cost of presenteeism may be hidden, but it is extremely high,” said CCH employment law analyst Brett Gorovsky. “The upward spiral begins with lost productivity and climbs from there - with increased safety and quality risks, and of course the risk of infecting others.”

To combat the problem, Gorovsky suggests that office managers adopt a strict policy of sending sick workers home and encourage employees to take personal responsibility for allotting their PTO. When possible, offering telecommuting can also help deter presenteeism.

Roll it over or not?

As an administrator, you’ll also have to determine whether you’ll allow employees to roll over their unused PTO days into the next calendar year. The alternative is to require your staff to “use it or lose it,” but Zuhlke favors flexibility. “I like PTO programs that allow for maximum flexibility for the employee, but you have to be careful because some programs are designed so employees can accrue fairly large banks of time off,” he says. That can create a staffing shortfall and deal a blow to your bottom line.

Under most state laws, PTO is treated as an earned benefit, meaning that you have to pay your workers for any unused days when they leave their jobs. (Employers who provide separate baskets for vacation, sick, and personal days off are generally only required to pay terminated employees for unused vacation and personal days - not sick days.) “They may have several hundred hours of PTO and decide to terminate employment, which can create a financial liability,” says Zuhlke. So it’s wise to encourage your employees to take time off regularly rather than squirreling their days away.

How much to give?

Deciding how many PTO days to grant your employees is more complex. It depends upon your office culture, how long different employees have been with you, and employees’ respective levels within your organization. According to the Society for Human Resource Management, the total number of paid days off among all types of businesses averages roughly 14 days for less than one year of service up to 27 days for individuals who have been with their employers for more than 15 years.

You can decide on a case-by-case basis how much paid leave to grant your employees, but keep in mind that employers who utilize a PTO plan often give up a few more days off than they would under the traditional system of allotting separate sick, vacation, and personal leave.

As you structure your PTO policy, remember that it must meet the dual goals of both acting as a competitive recruiting tool and offering employees more flexible choices. “We have three generations of people in the workforce right now, people who may be caring for young children and elderly parents, and they need to be given the option to use their days off as they need,” says Zuhlke.

Shelly K. Schwartz, a freelance writer in Maplewood, N.J., has covered personal finance, technology, and healthcare for 12 years. Her work has appeared on CNNMoney.com, Bankrate.com, and Healthy Family magazine. She can be reached via editor@physicianspractice.com.

This article originally appeared in the June 2008 issue of Physicians Practice.