From PTO to unlimited vacation, what policy is best?

by Doug Pitorak
April 2, 2015

[ibimage==33107==Original==none==self==ibimage_align-center]Shutterstock

Did you use all your paid time off (PTO) last year? If not, you're in good company. More than 40 percent of U.S. workers who were granted PTO in 2013 did not take advantage of it all, according to a 2014 report commissioned by the U.S. Travel Association

Furthermore, the study showed that about 34 percent of employees surveyed suggested that their management did not encourage or discourage taking time off, despite the study concluding that most managers know that refreshed employees lead to greater productivity. 

Needless to say, vacation is a hot topic today, and with the ever-evolving startup culture, companies are getting more creative with their vacation policies. So what's most effective?

To find out what policies are out there and how well they work, we talked with some Colorado tech companies that boast structured accrual policies, unlimited vacation and a mix of both. 

Accrual-based policies

ShopAtHome.com, a Denver-based company that helps shoppers easily save money, has a PTO bank. There is no use it or lose it policy. However, there is an accrual cap. According to Nick Larche, human resources coordinator at ShopAtHome.com, employees in the first three years with the company receive 15 PTO days per year, in addition to nine paid calendar holidays and one floating holiday. During each of those first three years, the accrual cap is 144 PTO hours. Once an employee hits that cap, they cannot accrue anymore PTO hours unless they take vacation and get themselves back under the cap.

Larche said the policy has been in place long befor he got there, and overall, he said the policy works. 

“I think it’s a productive policy, so long as we communicate that to our team members,” Larche said, adding that leadership needs to encourage their employees that it is OK to take vacation.  

Unlimited vacation 

Unlimited vacation policies are becoming more and more common, especially among digital tech companies. Tendril, a Boulder-based company that helps utilities meaningfully engage customers, is one example.

Three years ago, the company restructured its business, a process that Jody Lehnert, talent acquisition manager at Tendril, said emphasized employee satisfaction. They switched to an unlimited vacation policy.

“With the knowledge that employees are key to what makes a great company, and work makes up a large portion of an employee's life, we believe that a balance between work and personal time is essential in maintaining quality performance, an enjoyable office environment and an overall well-being,” Lehnert said.

Wayin, a Denver-based company that provides fulfilling social content solutions for its clients, also has an unlimited vacation policy. Aside from similar employee satisfaction benefits, Sarina Kimura, CFO and VP of human resources at Wayin, notes the administrative downfalls of most accrual policies.

“Putting on my finance hat, for a startup, having vacation accruals can be a significant liability depending on the company's policy,” Kimura said. “Having a traditional vacation policy usually requires more management especially for time tracking, accounting, etc.”

Larche said the PTO hours at ShopAtHome.com accrue in concert with pay periods, making the accounting a bit easier.

FullContact, a Denver-based company that provides comprehensive digital address books, also has an unlimited vacation policy, and they take it a step further. According to Brad McCarty, FullContact’s director of corporate communications, the company’s “paid” PTO works as follows: each year, employees are granted $7,500 to use toward time off. However they want to spend it is up to them, so long as they go completely off the grid. If employees work throughout their vacation, they have to give the money back, McCarty said.

He said the primary motivation for "paid" PTO is the unfortunate truth that one reason people don’t take a lot of vacation is that they don’t have the extra money for it. With that said, McCarty noted that people might not take PTO anyway (though that’s not the case at FullContact, and "paid" PTO is a big reason why).

“It doesn’t matter if you offer all this time off or if you offer next to no time off, people still don’t take vacation,” McCarty said. “The U.S. has kind of become unofficially known as the no vacation nation. Either employers don’t offer it or employees just don’t take it.”

A unique perspective on both

But does the policy matter? Does one kind of policy result in more people taking PTO?

A few years ago, HomeAdvisor, a Denver-based company that is the nation's largest online marketplace for screened home professionals, changed their vacation policy for corporate employees to be a "take what you need" policy. According to Kate Paulson, HomeAdvisor’s director of human resources and staffing, the change was made to give corporate employees more freedom and manage their schedules productively.

Non-corporate employees remained on the accrual-based vacation policy at HomeAdvisor. Paulson said the switch wasn’t feasible for the sales and customer-care centers, partly because the majority of their employees are hourly.

Nevertheless, Paulson said she doesn’t see a difference in how much vacation time employees on the two plans take. Overall, she said the company and the employees have benefited.

“As a lot of companies know, if you have a system where your vacation is based on a use it or lose it system, sometimes that can put a lot of pressure on the business,” Paulson said, adding that such a policy can result in too many people asking off right before the end of the year. “A lot of employees want to take time off before they lose it, and we’ve really been able to eliminate that problem for the company.”

Some companies do see a difference, however, and Casey Steiner works at one. She is the director of culture and team engagement at Zen Planner, a Denver company that helps fitness business owners thrive. The two-policy system was put into place before she started at Zen Planner. The sales and service teams are on an accrued PTO plan, while the tech and product teams are on a "take what you need" plan. Interestingly, Steiner said she finds that more PTO is taken by sales and services employees.

“Our team works hard and plays hard, and I find that the folks who are on the accrual PTO actually take more PTO than those who are on the unlimited plan,” she said, adding jokingly that she feels like she has to force people on the tech team to take vacation sometimes.

In Zen Planner’s case, Steiner believes the tech team is full with high performers who have a high sense of accountability. She thinks their desire to get stuff done at work might keep them from taking as much or more vacation than those on the accrual plan.

She also believes perception might play a part in the sales and services employees’ use of PTO.

“I think when people know up front they have this much vacation they need to take and it’s kind of a use it or lose it basis, they are more motivated to take it,” Steiner said. “Out of sight, out of mind with the unlimited plan; you don’t see how much you have, so you just don’t think about it as much.”

What vacation policy do you favor and why? What's best for your company?

Do you know a tech startup that deserves coverage? Email us via [email protected].

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