When Erin Pavane landed a job at a tech startup in Massachusetts eight years ago, she was shocked about one of the perks: Pavane was allowed to take all the paid vacation time she wanted, as long she was getting her job done while at work.
She couldn’t believe a company would offer such a thing. Visions of her co-workers taking months off at a time floated in her head.
But after a while at her new job, Pavane noticed that nobody abused the fringe benefit. Yet it had a positive effect on morale and productivity. It came down to the CEO’s trust in the staff, she said.
In fact, when Pavane launched her own business in 2017 – Providence-based placement firm The Hire LLC – she and co-founding partner Tyler Wentworth added unlimited paid time off as a benefit for their staff of seven.
“Having faith in your employees,” Pavane said in explaining her decision. “You are not in high school. You don’t need to micromanage people.”
Indeed, while it may seem counterintuitive – maybe even unwise – for companies to offer employees unlimited paid time off, the concept is taking root in the American working landscape, albeit slowly over the past several years. And more employers may take it under consideration now that the COVID-19 pandemic has upended the workplace, with employees working from home at least some of the time and many companies struggling to fill open positions.
Before the pandemic, some high-tech companies offered unlimited PTO as a recruitment tool, differentiating themselves from other employers.
Now employers might still use it as a recruitment tool, especially while dogged by a labor shortage, but they also deploy it as a cost-cutting tool – not having to carry over time off or pay out unused time when an employee leaves the company. Also, the need for tracking and recording time is eliminated, simplifying things for both employers and employees.
Amber Clayton, director of the Society for Human Resources Management’s knowledge center, said about 1% of U.S. companies offered the unlimited PTO perk in 2016. In a survey of 639 companies earlier this year, the number had edged up to 4%.
It’s unclear whether the pandemic will push many more companies to institute a policy of unlimited PTO, but the upheaval the crisis has wrought has already changed viewpoints among some executives, according to Clayton.
“Employers are being encouraged to take into consideration the increase in mental health issues,” she said. “Some employers are providing more time off to avoid burnout, especially at a time when employers are struggling to retain employees and find new talent.”
[caption id="attachment_381502" align="aligncenter" width="1200"]
NOT FEASIBLE: Karl Wadensten, CEO and president of vibrator manufacturer VIBCO Inc. in Richmond, says it wouldn’t be feasible to offer his 100 employees unlimited paid time off due to the nature of the company’s operating schedule. / PBN PHOTO/ELIZABETH GRAHAM[/caption]
LOST DAYS
What is clear is that using vacation time can be a vexing problem in the workplace.
According to the U.S. Travel Association, 55% of workers reported not using all their days off in 2019, equating to 768 million unused PTO days. Of those unused days, 236 million were forfeited, amounting to $65.5 billion in lost benefits.
And that was before the COVID-19 pandemic.
Indications are that the trend of unused vacation time has continued during the global crisis, as many workers deferred getaways until travel restrictions were lowered and some working remotely were hesitant to take time off because they were home already.
That’s put PTO policies in the spotlight, with unlimited time off garnering attention as a possible solution.
The idea hasn’t exactly caught fire in Rhode Island, but some companies implemented a version of it before the pandemic.
Atlanta-based Cox Communications Inc., which provides telecommunications services in Rhode Island and has about 800 local employees, put a flexible PTO policy into effect on Jan. 1, 2019. The policy allows employees as much time as needed, as long as the time off is approved by a manager. Company executives immediately noticed a difference in how the PTO was used.
Keith Wilson, executive director of employment practices and compliance at Cox, said that in the first six to eight months of 2019, executives noted an unexpected 10% increase in employees taking time off. But Cox looked at this as a benefit to the company because the policy was intended to satisfy employee needs, Wilson said.
“I would attribute this to the novelty of the new policy and the fact that exempt employees no longer felt the need to save their PTO for fourth-quarter holidays,” he said. “However, the second half of 2019 saw a return to requested time off that was consistent with prior years.”
Jeffrey Lavery, a Cox public relations manager based in West Warwick, said the new policy didn’t alter the amount of time off he takes annually, but he said it has relieved any pressure he might have felt about using his time.
“The quality of my time away [from work] has increased significantly,” he said.
Wilson said time-off requests companywide declined significantly in 2020 and 2021 as the pandemic put a damper on travel and people were working from home instead of the office.
“However, as COVID-related restrictions have eased and more employees have been vaccinated, this summer is the first real quarter that we have seen time-off requests start to return to normal levels,” Wilson said.
[caption id="attachment_381501" align="aligncenter" width="1200"]
FLEXIBLE POLICY: Ross Nelson, left, Cox Communications Inc. senior vice president and region manager, Northeast, speaks with Jeffrey Lavery, manager, public/media relations for Cox, in Nelson’s office. The company put a flexible vacation policy into effect in 2019. Lavery says the new policy has improved the quality of his time away from work. / PBN PHOTO/MICHAEL SALERNO[/caption]
A TREND IN TECH
One of the more-outspoken proponents of unlimited time off has been Aron Ain, chairman and CEO of Ultimate Kronos Group, a $22 billion global provider of workforce management software based in Massachusetts and Florida.
UKG has offered an open paid time off policy since January 2016, when the company was known as Kronos, before a merger with Ultimate Software in 2020. Ain, author of the book “WorkInspired: How to Build an Organization Where Everyone Loves to Work,” was keynote speaker at a Business Value Forum Inc. event at Bryant University in Smithfield in December 2019.
Pavane and Wentworth, from The Hire, attended the event and found that Ain’s experience at UKG confirmed their decision to offer unlimited PTO at their small business.
“Ain said it was working well, with a small increase in paid time off days,” Wentworth said. “It was good to hear of someone else believing in that culture.”
According to Pavane, “He said they had an incremental increase around the holidays, but they also had their best year ever. The correlation for us was, ‘Wow, we can make this work.’ ”
David Almeda, UKG’s chief people officer, said that in the year after rolling out new benefits, which included an increased 401(k) match, a scholarship program for employees’ children, a child care assistance program and student loan financial assistance, employees took an average of 2½ more days off – and the company had its best year ever.
“Our biggest driving factor while establishing the new time-off policy was our desire to show [UKG employees] that we trusted them to get their work done and that we wouldn’t look over their shoulders to dictate when they were in the office or on vacation,” Almeda told PBN in 2020. “By showing trust in this way – in addition to our longstanding openness to flexible, work-from-home arrangements – we further cemented its importance within our culture.”
The move appears to be popular among large tech firms. Clayton said companies such as Netflix Inc., Oracle Corp., LinkedIn Corp., Roku Inc. and Twitter Inc. offer unlimited PTO to their employees.
It has not been without some snags.
While some employers may be nervous about offering unlimited PTO for fear that the perk would be abused, others have found that once the policy is in place, their employees are hesitant about taking time off, leading to underuse.
“There might be some hesitation by employees in taking time off because they’re not sure about how much they should take off,” Clayton said, due to the perception of what is perceived as too much versus too little time.
Clayton said that while unlimited PTO sounds enticing, it can be counterproductive if employers do not enforce mandatory minimums. And with workers not opting to take advantage of the policy, the result can be burnout, lowered productivity and a higher turnover rate.
“I think it depends on the culture of the organization whether or not employees feel comfortable asking for the time off,” Clayton said. “It’s also about managers, and whether they are being flexible in the workplace.”
Unlimited PTO may be well-suited for worker retention and recruitment in the tech sector, where work isn’t necessarily a clock-in, clock-out affair, but implementing such a policy in other sectors isn’t so easy.
At VIBCO Inc., a Richmond-based industrial vibrator manufacturer, CEO and President Karl Wadensten has struggled to keep employees and find new workers to staff the factory, which operates 12 hours a day, five days a week.
Wadensten tries to do what he can to show his 100 employees they are appreciated and respected, and he works to instill in them a sense of purpose to reduce the rate of turnover. They receive 12 to 14 days of PTO. Wadensten is supportive of business executives “thinking out of the box” to improve workplace culture, but unlimited PTO is too far out of the box.
The VIBCO factory floor is a finely tuned operation, where about 60 employees at a time work nine-hour shifts in which machinists fashion parts from raw materials and pass those pieces to assemblers who fabricate the vibrators.
There’s no room for employees to take PTO whenever they want and in unlimited amounts, according to Wadensten. “We’re in the ‘do it now’ business,” he said. “How can we do it now if we’re missing people? Another company might be able to do that, but not us. I don’t think any manufacturer could do that. “
David M. Chenevert, executive director of the Rhode Island Manufacturers Association, agrees.
“We always tried to be flexible, but in manufacturing you need bodies to physically work on the machines,” he said. “Our environment is based on a lean approach to keep overhead down. We worked with our employees so that if a top setup person was on vacation, we made sure the other setup people would be in.”
Crucial for manufacturers is meeting delivery dates for their customers. “We need employees present to do that,” Chenevert said. “Small shops rely on everyone, so when one employee goes out, it disrupts their ability to meet demand.”
[caption id="attachment_381503" align="aligncenter" width="1200"]
LIMITS ON TIME OFF: A survey conducted by the Society for Human Resource Management in 2019 showed that the majority of workers across all classifications receive a limited amount of personal time off that combined vacation and sick time. Unlimited leave was a rarity.
*Paid personal leave benefits as offered separately from paid vacation or sick leave. SOURCE: Society for Human Resource Management survey of 2,763 U.S. businesses conducted in April 2019[/caption]
FLEX OPTION
Many Ocean State businesses have found a middle ground, according to John Simmons, president of the Rhode Island Business Coalition.
Simmons said businesses have implemented a flexible time-off policy over the last several years, combining sick days, vacation days and personal days into one PTO count.
“There has been a move by companies toward taking time off and merging it with PTO,” Simmons said. “So, the use of sick time, or vacation time, is just classified as time off to allow flexibility for employees to take the time they need.”
Simmons said implementation of the policy depends on the industry sector, as some businesses require workers to adhere to a schedule to meet demands. He said implementing an unlimited policy would be challenging for businesses that have those parameters.
Chris Ready, chief financial officer at DiPrete Engineering Associates Inc., told PBN in 2020 that unlimited vacation time was on the company’s radar but never got enacted. However, flexibility is part of DiPrete’s culture, he said.
With 60 employees, the company is small enough that “the owner [Dennis L. DiPrete] cares about everyone who works here,” Ready said. “If they have a milestone event, say a birthday, we’ll take them out to a bowling alley or mini-golf or to a local brewery. If they have a sick child, they can stay home and work remotely. It’s not unlimited vacation time, but we think the benefits we do have are worthwhile.”
At The Hire, Pavane doesn’t regret that she and Wentworth took it a step further and implemented the unlimited PTO. The company has seen steady revenue growth since it opened.
“We’re focused on happiness,” she said. “We’re focused on happiness inside our organization, outside our organization with our clients – and every interaction we have, we are looking to make the best match for happiness.
“Higher profits, increased productivity, hitting goals – that’s happiness for everyone,” she said.
Paul E. Kandarian contributed to this report.
Cassius Shuman is a PBN staff writer. Email him at Shuman@PBN.com.