Unlimited PTO: The Positives and Negatives of Unlimited Paid Time Off - Mission to Grow: A Small Business Guide to Cash, Compliance, and the War for Talent - Episode #119

MTG - EP 119 - Mary Simmons
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Mary: [00:00:00] let's, let's define unlimited PTO as well. Uh, just because, you know, I, I know it sounds pretty. Um, but I just want to be clear and then there's two different ways to do it. So you could do open PTO and that's, what Asure adopted. Of course, being a payroll, uh, company, uh, we have a very good tracking system.

So that is a self managed. PTO policy. It is unlimited, but we are tracking the time. Why are we tracking the time? Why would any organization choose to track that time? I think it's pretty obvious. You want to make sure that people aren't taking advantage, of the time. other organizations choose, Mike, to have a true Unlimited PTO.

They are not tracking it. and it really, the responsibility there falls on the employee.

Intro: Welcome to Mission to Grow, the small business guide [00:01:00] to cash, compliance, and the war for talent. I'm your host, Mike Vannoy. Each week, we'll bring you experts in accounting, finance, human resources, benefits, employment law, and more. You'll learn ways to access capital through creative financing and tax strategies, tactical information you need to stay compliant with ever changing employment laws, and people strategies you need to win the war for talent.

Mission to Grow is sponsored by Asure. Asure helps more than 100, 000 businesses get access to capital. Stay compliant and develop the talent they need to grow. Enjoy the show!

Mike: Unlimited PTO. This is, this is a growing trend. I think maybe for some folks hearing that concept just sounds insane. How could you possibly, why would you, how could you possibly pull it off? But there's 8 percent of U. S. companies have some sort of a quote unquote unlimited PTO policy, and it's growing pretty fast.

I would say probably in response to maybe [00:02:00] Uh, maybe this started as a little Silicon Valley, uh, ish in technology, kind of a spread, the concept is spreading to other areas, but I'd say mostly due to the war for talent, right? Uh, we talk about the, the labor shortage all the time. This is not a short term thing based on birth rates.

30 years ago in job growth, there are more. People, which is why we just recently crossed over a 4 percent unemployment rate. But for a, for a long time, we're sub 4 percent unemployment for a, for a very, very long time. Um, so the, the war for talent is real. And I think businesses have to look at new approaches, not just compensation, not just benefits, but maybe this kind of a benefit.

What is your PTO policy? Because, uh, certain employee groups, especially younger ones, they're really going to look at what is your personal time off. Your PTO strategy is a component to whether they join your firm or not. So, uh, great [00:03:00] guests, uh, with me today, Mary Simmons, our own VP of HR Compliance and Consulting.

Uh, if you're a regular watcher of the show, you know, Mary in, uh, Spoiler alert, Asure has recently adopted, uh, an unlimited PTO policy. So I think we have. We have learnings to share here and maybe some strategies. So, uh, welcome to the show, Merrick.

Mary: Thank you.

Mike: So let's look from the jump. What did, what would you say?

Uh, just the top, maybe pros and top couple of cons. And let's, let's kind of dive into each of those paths of, of an unlimited PTO policy.

Mary: Okay. And let's, let's define unlimited PTO as well. Uh, just because, you know, I, I know it sounds pretty. Um, but I just want to be clear and then there's two different ways to do it. So you could do open PTO and that's, what Asure adopted. Of course, being a payroll, uh, company, uh, [00:04:00] we have a very good tracking system.

So that is a self managed. PTO policy. It is unlimited, but we are tracking the time. Why are we tracking the time? Why would any organization choose to track that time? I think it's pretty obvious. You want to make sure that people aren't taking advantage, of the time. other organizations choose, Mike, to have a true Unlimited PTO.

They are not tracking it. and it really, the responsibility there falls on the employee. The philosophy, and it did start with a lot of the tech companies, the philosophy there is, Mike, you get your work done and you're a responsible person. I'm going to empower you to then say, my work is done. I can go on vacation.

Now, As an HR professional, I'm just going to add some cautionary [00:05:00] advice there, which is you really need to train your managers. On tracking that time to not track it at all would be silly because nobody's getting all their work done and taking 50 weeks off. And if they are, they need more responsibilities, right?

So if they're only working two weeks a year, we, we have a little bit of a problem, but if you haven't tracked it to go back to Mike and say, Mike, you know, your time's been a little excessive. Um, you know, I'd like to see these deliverables. Before you take, you know, some more time off, but you don't want to get into an argument with the employee, right?

You should, you should be tracking when they're out. You need to know when they're out anyway, right, Mike? Because if you're asking something of them before they go, uh, and you need to know when they're back to, to assign them something else. So those are two ways that, that you can look at it. Obviously, every [00:06:00] time we help with policies.

It's customized. There might be slight nuances to your organization. Um, but those, those are the two basic, uh, ways that you would, you know, go forward with this plan.

Mike: Yeah. So like there, I want to have, I got so many things going through my head. Here around the strategy, let's just maybe stick on some of the tactical do's and don'ts. Um, I mean, one of the things that just creeps into my head and I'm jumping ahead perhaps is you and I know that one of the big areas that employers get themselves in trouble is misclassification of employees, uh, exempt, non exempt.

Uh, so, so clearly we're, I mean, if you misclassify someone, uh, as exempt when they really should be a non exempt employee and they're taking all this time and you're not tracking it. Oh my gosh. The, the [00:07:00] DOL audit from hell is, is in your future. Um, maybe just, let's walk down a practical path. Some of the, some of the considerations employers need to be making here.

Mary: so let's, let's start there. So, first of all, if you do this, you need to look at your organization, organization holistically, and your policy has to be very buttoned up. This policy is not this long in your employee handbook. It is probably a page or 2. It needs explanation to the employees and the managers.

So, definitely exempt, non exempt is a consideration. Um, the other thing that you want to consider is there's leaves. Right? So if you're FMLA eligible, or you have a paid family leave, and we have about 20 states right now with paid family leaves, [00:08:00] we want to make sure that our employees are taking the leave that is appropriate for the reason that they are going out.

Uh, why is that Mike? Because we need to track it. In other words, if you have unlimited PTO, you might say. Oh, well then, when somebody has You know, gives birth and they would normally, you know, for a FMLA eligible organization, they'd normally get 12 weeks off. Now it's unlimited. So now they can take 6 months off for the child.

So we want, but that's not, you know, viable for most organizations. Believe you me, I do have organizations that I support, um, that would be okay with that. They can manage it. It's a big enough organization to absorb that work. So again, these policies need to be looked at very carefully. You're not just [00:09:00] writing an unlimited PTO policy.

You need to say, how many states am I in? If I'm in other states, where are their leaves? Where does this run concurrent? Where is it separate? Right? Um, and the other part of your policy, and, and, and this is a pro and a con, it's a pro for the organization. The other part of the policy is, And why a lot of organizations choose these policies, Mike, I'll be honest with you, is because they don't want to pay out PTO when people leave.

That can be very expensive when you're a big organization, which is about 10 states, uh, I couldn't rattle them off now, but of course it's California that mandate that you pay out PTO. Now, Why? And, and for those states that don't mandate it, like New York, the DOL would say to you, they'd slap you on the wrist and say, Pay Mike, [00:10:00] right?

So that goes into the policy. Also, that's a positive for the organization. They're saving money. It's an, it may be a negative for an employee who says, Ooh, I get, I get, you know, all my PTO paid out. I'm going, when I, when I terminate, I'm going to get this little chunk of money with an unlimited PTO. You don't have to do that.

Remember what I said in the beginning, everything has to be customized. That to me, that's the strength of having a really strong HR function is that everything that is customized to your organization, your industry, your employee base, your organization. The way you want to grow. So you could, you can give more.

You can always give more. We all know that. But if you want to save money, unlimited PTO, if you're in a mandated state that makes you pay out PTO, and you have a lot of employees, I'd say north of a hundred employees and a relatively high [00:11:00] turnover rate. I'm going with unlimited PTO, or I'm going to lean towards it.

Right. But there's a lot more research we'd have to do.

Mike: Let's stick on that one for a second. And I agree, but you, you've got to have a, you got to think this through, you got to put it in writing and you've got to train on it. Um, cause I've seen this, I know, I know internally, and I've seen this at other organizations, um, some unintended consequences where I, I think generally, you know, always try to give the entrepreneurs and business owners the benefit of the doubt.

That's really the purpose of the show is to help them. And, and I don't think there's a bunch of, uh, You know, greedy old capitalist pigs smoking cigars in a boardroom thinking, how can we avoid paying out PTO balances? They're like, Oh my gosh, we can't recruit anybody because the, the, our, our, our competitors are offering, offering six weeks, eight weeks, PTO, unlimited PTO, uh, you know, I can't pay that much more.

I just, it'll, [00:12:00] it'll kill our margins. But this, this is a, I'd say my opinion, 90% a way to attract and retain talent, period. This isn't cost avoidance. Um, first of all, maybe, do you agree with that?

Mary: I think, I think it's both. I mean, if you want to, if you want to move to the pros, um, so, and let me dig in with those dangers. Just 1 more thing. You may have people take too much time. The statistics will tell you they take less time. You don't usually have people taking eight weeks vacation. My son's always been in tech.

so most of the organizations he's worked in his young work life, he's had unlimited PTO and, He takes less than when he was at a bank and got four weeks. He was like, I [00:13:00] get four weeks. I'm going to take my four weeks. It's a little bit easier. Again, remember with unlimited PTO, whether you're tracking it or not, it's a responsibility for the employee to say, I can take the time off because I did the work.

Those are some, some of the dangers I'd say another danger would be, or, or a downside of it would be that you do have employees who feel like it's inequitable. What do you mean? Jane just started and she has, she has unlimited PTO. I've worked here 30 years to earn my eight weeks or my six weeks, or whatever, whatever it is.

And, you know, you mentioned that Asure went to this policy and I, I did have that, um, you know, comment made to me, uh, by some, some employees. Um, so,

Mike: I [00:14:00] want to go hover there for a sec. So that was probably the biggest surprise to me that I didn't see coming. And

Mary: I agree.

Mike: it was We thought we were rolling out this. What I thought at the time was clearly nothing but good news. How could anybody object to this? But there's, there's the sense of fairness. My gosh, I just worked 20 years to get to this level.

Now, the next person that walks in the door is going to get that in more. That there is a, a, a fairness feeling that like, I, I still support it. I think it's the right thing for a whole bunch of reasons. And we'll

Mary: Yes.

Yes. Um, but. Be warned, employer, entrepreneur, business owner, that if you're going to do this, unless you just don't have any tenured employees, uh, you're going to have people that will feel this way.

Mike: And so pull that, you know, be prepared to talk to it, train on it, pull them aside. [00:15:00] Uh, is there anything special for them? I mean, yeah,

Mary: to have that communication. And, and, you know, even for the organizations that say that aren't truly tracking it and letting employees empowering them to choose the time they take off. I mean, I certainly would put something in that policy that says, That says it still needs to be approved.

You can't have your entire department out for the same week. And in that case, seniority is going to rule. And that's where your people with seniority will get. Some sort of an advantage. So that's something that I'd write into the policy. Again, it's customized. We customize every policy that we write for all of our employers, but I would make sure that that's something you consider because this is the fallout that I have heard from, from other organizations.

Um, so you want to address it.

Mike: Yeah, yeah, right. [00:16:00] Uh, what? I took you off track a little bit. You're going down a list of pros. What else do you want to cover?

Mary: Moving on to, I'd say the dangers, let's move on to the pros, right? So why are we going to do it? And you, you mentioned work life balance, um, and attracting and retaining talent. Right? So if I have unlimited PTO and the next company I go to has a traditional PTO policy, Mike, I could be starting with, you know, accruing one day every couple of months, I might not even start with a week vacation.

That's. It's going to be really hard that that's on the benefit of the company to retain you, um, and for those companies who are still sort of in those dark ages, uh, that's really hard to attract somebody when you're, you know, making them a crew, uh, you're not even starting them off with vacation. I'm all for, uh, Introductory period.

You need to be here for three months before you take any time. I understand [00:17:00] that. Um, but time off is comes up in every single survey. This is what the employees you are recruiting want. This is what the millennials, the Gen Z's are looking for. It's what you and I are looking for, you know? So I think that that's, that's pretty consistent.

So I, you know, I think that's a great advantage. I'd say one of the other pros, and I think this is really important. We always talk about, uh, really strong HR function, helping make employees more productive. And so this is a piece of it, Mike. I think asking your employees to manage their own time. Makes them more productive.

You know, the saying every time before somebody goes on vacation, you get more done than you did in the prior month, if you're managing your time and saying to yourself, if I get X, Y, and Z projects done, I feel [00:18:00] like I can take a week vacation, next month. I think that empowers your employee.

I think it gets them engaged and engagement makes employees more productive. And when you have productive employees. Your growth goes right up and, so does everything else. So I think managing their own time, you know, putting it in the employees hands to manage their time, manage their workload. It's a huge, huge benefit.

And I think that's, that's the way we want to focus our employees. Look, it's, it's, I think it's, it's a big incentive. It's kind of work hard, we're going to reward you. So, what's my reward day in and day out? You hear that from employees all the time, and you would say a paycheck, but this would also be an additional benefit, a reward, an incentive to work hard.

To be [00:19:00] engaged, to be focused on the work and help the organization grow. So for all of those reasons, you know, I like this policy. It's not for every organization, Mike, not at all. I've had employers come to me and say, I wanted, I want unlimited PTO. We always stop and say, okay, why? Let's tell me why, right?

So I need to hear the right reasons, and then I walk them through the different ways we could write the policy. 50 percent of the time they go, okay, stop there, Mary, because it is work for the organization if you're going to track it. And if it's not being tracked, it's work for the employees, which may not be something the organization's comfortable with.

So this takes a lot of thought.

Mike: Um, Boy, I'm writing down notes for all kinds of paths to go down here. I know that, I know there's sometimes this [00:20:00] dichotomy between employee, how employees perceive PTO and employers, and having, having been an employer myself many times and an employee many times, I, I feel like I get it. If I'm an employee on one hand, so the employer thinks unlimited, how could you be disappointed in that?

That that's amazing. But when it's unlimited, it stops being considered part of my compensation. If I'm an employee and if I, depending what your policy is for banking enrolling in the next year, maybe when I terminate someday, whether I get paid out on that, it's, it's in some ways almost viewed as a retirement account, a savings account, I'm banking it.

It's part of my compensation. And so now all of a sudden, if it's unlimited, clearly it's a, Kind of a sorta use it or lose it, but it's not really losing anything because it was always unlimited anyway. But, but there's not this, there's [00:21:00] not this feeling of an incremental addition. I've had my salary, maybe I have a bonus, maybe I have commissions, whatever, but I've also got this PTO that in my brain as an employee, I think is part of my comp.

And in a way you just kind of took that away. And so, so I've seen that. And then from the employer side, I'm like, Oh my gosh, that was, it was always meant to be a benefit for you to take time to do whatever you needed with your family and your, your, your work life balance and whatever else. And it was never meant to be.

You know, a retirement plan. It wasn't, it wasn't meant to be something that you're just, you know, you're, you're gonna, you're not, you're going to capitalize when you quit someday. Uh, it was meant to be personal time off, just what the acronym says. And so I feel like there's, I feel like this reveals a pretty big disconnect between employers and employees of what the intent.

of PTO even is, and [00:22:00] maybe that's the place to start for employers when you're, if you're thinking, if you're going to implement something, you almost have to start there. What, not just what is PTO and here's our policy. Why do we offer PTO in the

Mary: Right. What and what and why? Um, and listen, I'm, and this is an opinion. I'm not a big fan of incentivizing people to leave. Right? So, um, recently I had an employer call me and, uh, you know, they were laying somebody off and I was helping them with this, with the severance agreement and, uh, you know, a couple of different nuances, keep them on.

They wanted to keep them on the rolls for two weeks. It was cleaner with the pay, uh, et cetera. Um, and you know, they were like, well, in our handbook, you know, our policy is that the severance agreement is two weeks for every year. I'm like, why would, and there's lots of companies who do that. I, you know, listen, I'm in a position of advisement.

I [00:23:00] don't tell companies what to do. I advise you, I tell you the positives and the negatives. Um, so to me, I don't know why we would incentivize an employee to, to leave. Like, Ooh, I get, you know, set. Now you're only going to get, you're not going to get set. And some organizations that I work for, a couple of my nonprofits, you get the severance, whether you're terminated, not for cause, a layoff, or you resign.

And the same with paying out the PTO. Now, I will say that the positive of paying out the PTO is you, unless you write a strict policy, when you give your resignation, you can't have vacation. What's the incentive for the person to give two weeks vacation, two weeks notice? They're going to say, well, you're not going to pay me out my vacation.

I'm going to take my vacation. Tell you that I'm leaving and then that next two weeks, I'm not very productive. I've [00:24:00] seen it over and over and over again. So that's your argument for paying out the vacation, right? It does give that employee, you're going to be, so we've written policies that say you'll get paid out your vacation.

Um, you know, if you give 2 weeks notice. Um, and so that, that's a good policy. That, to me, is not incentivizing them to leave. It's incentivizing them to, to work their hardest till, till the very end. So, you have to look at it in a million different angles and under the microscope that is appropriate for that organization.

That's why you need HR professionals. It's a lot,

Mike: Um, this really comes down foundationally first principles. What's the purpose of PTO? And, and what is the relationship between the employer and the employee? [00:25:00] What is this? And not, I don't mean literally a sign on the dotted line contract contract. What's the social contract between. An employer and an employee.

What is, what is the expectation? I think a lot of these policies like banking PTO, uh, getting paid a certain amount of severance, the unintended consequences erode at this relationship where it's mutually beneficial as an employee. I'm staying here and I'm giving you my best effort because this is what I get in return and and vice versa and I'm trying to build a winning team and so I want to give you the employee what you need and I also want your very best in return, right?

And there's transparency to that and I think so many times these policies just undermine that. What is it about an unlimited PTO policy? There's different ways to roll it out but what is it about an unlimited PTO policy helps in that [00:26:00] area.

Mary: Well, like I said, I think it empowers the employee. I feel like it kind of level sets, you know, you know, it comes down to power. I think a lot of times the employees like, well, you're, you know, it's your rules, you know, it's, you know, all about the employer. The employer has the favor. I think this puts a little favor back to the employee.

I think it gives them some autonomy. Um, and I think it makes them feel. important. Um, I think, you know, a great way to, to terminology that we use at Asure is self managed PTO. I love that terminology because that's what it is. And I think when, when we're doing manager training, Empowering your employees is one of the things that we will talk about all the time.

People love when they are empowered and this is one of the best ways to do it.

Mike: [00:27:00] Yeah. Mary, I want to pivot a little bit to what is this route? What, what else other than having a policy? So let's say, okay, I'm bought in. Um, I, I can see how my employees would like this. I understand some of the pros and cons, but, uh, boy, new employees would really like this. My existing employees would really like this. This, this puts due pressure in other areas. Like, uh, from, from my perspective, if you're going to do this, you got to really have your act together

Mary: Mm hmm.

Mike: as a business and you have to have I'd say mature managers who know how to handle this because an immature manager doesn't have to set expectations when the policy, the handbook says two weeks in the first year, three weeks next year, because it just lays it

in a world of.

Unlimited PTO. All of a sudden, now the [00:28:00] informed employee is like, well, the policy says unlimited. Why can't I have that? My, my cousin's getting married that weekend. You're telling me I can't go to my cousin's wedding. And now all of a sudden that manager, they don't have the policy to lean on. They're going to have to rely on the work and the job requirement.

And managing a team in, right. There's all of a sudden it puts a lot more pressure on them. But what, what, what, what's your guidance for employers in this? Let's stick to frontline managers before we go to policies first.

Mary: I agree. Um, you know, when we do the manager training, we're always saying, you manage the people. You know, making widgets very well. Most of your managers can do that. The manager training is to teach them to manage people. And this is an area when we have to say no to our employees, it's a difficult area and what happens with an unlimited PTO, and I'm sure, uh, anybody listening can say it happens with [00:29:00] any vacation policy.

Jane gets to take vacation all the time. With unlimited, it might be, she's taking vacation all the time. So. So the manager needs to manage Jane as well as manage the communication to the rest of the team if they complain. Anytime somebody's out on vacation, you know it puts the onus on the rest of the team and makes their work a little bit more difficult.

So if Jane decides to take eight weeks in a year and somebody else only takes a week, the person that takes a week will probably complain, Even though it's their choice because that's human nature and the manager needs to be trained. How do I communicate the policy to the new employees? How do I communicate it to the employees that I have?

How do I communicate how it is used? You, you need to work into your conversation, your coaching and counseling [00:30:00] with your employees, what their workload is, how is their workload? Is it too heavy? What are the deliverables that you have for that employee? And, you know, making your expectations very clear. If you're saying that they have to get something done in a week, it probably isn't the best time for them to take off.

You know, because that deliverable wouldn't happen. So again, they're coaching and counseling. There's a motivation piece here as well, but we need to make sure that the employees understand when they can take it, um, and and that they have to be productive, you know, whether they take it or not.

Mike: And in some of this, you can incorporate a policy. So like, if you're a payroll processing company, okay, there's blackout periods that are around tax filing times and payroll processing times and year end times that no one is allowed PTO [00:31:00] no matter what, because it's all hands on deck to serve our customers.

Cause this is when the rubber hits the road. This is the, most time of the year. So those can be policy things. For the manager, and I think in roles, if you're managing employees that are You know, dare I say, you use the word widgets, they're producing widgets. their, responsibility and their output is very narrowly and well defined.

it's probably more black and white. It's like, okay, team, we have to produce 100 widgets. There's 10 of you. On average, you do 10, 10 a piece. the, math is the math about who can take time and when and how to load balance that, but in so many jobs, yours or mine, there will never, ever, ever, ever be enough hours in a day to do all the things that we could and should be doing.

It's all about prioritization of work effort.

Mary: agreed.

Mike: How do managers balance [00:32:00] that? Because. This concept of, well, I got my work done. Well, no, you okay. Did you, maybe you got your priorities done? There's no such thing as you got your work done in an awful lot of jobs.

Mary: Yeah. Yeah. And it's easier in some jobs than it is in others, right? When there's project work, it's a little bit easier to say, hey, I finished that deliverable for that client. You know, I, I feel like I can go, but, but you're right. It, I think. Is very difficult for some managers and depending on the work, right?

Uh, it is difficult, uh, to. Set those expectations, but they have to be set. And if you're not setting expectations, the employees never going to be able to fulfill their job appropriately because. If there is no expectations, what do I have to do? I don't know. [00:33:00] So, it's, it is very important that your employees know what the expectations are.

And, you know, there's no reason that the manager can't set some of those, uh, Departments might have blackout periods, right? You know, so each department, you know, sometimes year end is really important. Sometimes March is important for my accounting, uh, firms that we support. It's, it's all over the place.

So that has to be looked at as well and communicated to the employees. You don't want them asking and then you say, Oh, That's a blackout period. That should be in your policy. And you got to tell them, you can't just put it in a policy and assume they're going to read it. It has to be a really good, clear, positive communication.

Not, you can't. It's, you know, these are areas where we really need you here.

Mike: And I would, I love this proactive, uh, guidance, right? So if, if you're in [00:34:00] industry, um, that, you know, maybe, maybe July is your busy season. Maybe,

you know, that's your, that's your hardcore just to be advising, Hey, it's January, it is now March. You haven't taken the time off, just know, I'm not going to be able to let you have any time in July because we're, we're as a company, we're all heads down then.

Should we be trying to strategically try to find you sometime? I want you at your best. Then maybe we take a three day weekend here or there, but you know, if you don't have a vacation planned with your family, you know, I want to make, you know, I want you, I want you to have a work life balance. I want you all in.

I know that's

Mary: I encourage

you. Yeah.

Mike: But, but let's, let's make sure that, you know, we're, when come July, you're ready to, you're, you're, you're, you're best. And so let's, let's take some time out of time. That's not the thing managers are usually saying in a non, in a non unlimited PTO world.

Mary: I agree. Um, [00:35:00] and of course I'm just going to add, make sure it's consistent, right? Make sure that your managers are not saying it to the people that, that they like, um, or to any particular group of people. It should be said to everybody, recognizing that if you're managing You know, the production line, you know, they might have a different block out period than reception if you're also managing them.

So, so, you know, you can do different. Uh, classes of workers in a different way, but be consistent within that class. That's really important.

Mike: what's your guidance here for exempt versus non exempt? Cause I think that these. Where I was going around, maybe the, the roles might not be as black and white, typically, pretty commonly more in, uh, uh, an exempt world. Let's focus maybe at first on non exempt roles. So meaning [00:36:00] it's hourly, they get paid overtime if they work extra, that's usually tied to jobs.

You know, if you're the front desk receptionist, and there's only one of you, Um, you're kind of tied to office hours, and so it's kind of black and white around PTO. What's your, what specific guidance do you have for, uh, non exempt employees first?

Mary: So the first thing that I would caution, and I, and I've seen it a couple of times in, in the organizations we support is that because it's unlimited, they, the managers may take advantage. Call that receptionist when she's on vacation, or he's on vacation, or they're on vacation and say, hey, do you remember the FedEx envelope being sent out or it didn't and taking advantage and you really want to be.

Careful there, right? So now we've completely negated a lot of the [00:37:00] positives, um, that, that we talked about the cons and the reasons that we would do this policy.

Mike: Not to mention, if you ever got sued and the DOL, Department of Labor came in for an audit, that's payable time. It's not just an, not just a disrespectful interruption of that person's time.

Mary: right, but assuming they're getting paid for that unlimited PTO, um, and listen, some, some companies do have unlimited. And they pay a certain amount of weeks and the rest they can take unpaid. So that's important. But the other important thing is, let's say that the receptionist worked Monday to Wednesday, and Monday to Wednesday, they worked every day.

a 10 hour day. It was super, super busy. They knew they were taking Thursday and Friday off, so they worked those 30 hours, uh, Monday, Tuesday, Wednesday, they put in 30 hours. You start calling them on their day off, Thursday and Friday, right, to an excessive amount, you know, [00:38:00] you might push them into overtime.

So, again, you have to be very careful. Every Minute, you know, or 15 minute, usually 10 or 15 minute increments that your non exempt employees work, they get paid. So you have to be very careful about that. Um, I would also say that a non exempt employee by definition normally has more administrative tasks.

It may be a little easier to say. Is it done? Is the work done or not done? Um, and so it might need some more oversight. Um, when the vacation can be taken,

Mike: Okay. Any specific advice or guidance around the exempt staff then?

Mary: I think it's, it's similar in a way, not as, as far as the pay goes right? Because our exempt employees, um, yeah, you do [00:39:00] have to be careful about not, uh. Taking away pay, um, unless it's in the policy, right? If I work one hour in one week, I'm paid a salary, so I should be paid for that week. There's a lot of nuances there that we've talked about in other seminars, so I'm not going to go down that rabbit hole, but we have to be very careful not to deduct time inappropriately from our exempt employees.

That, that's your danger there, right? So, So, be careful there. And I would just say that for your exempt employees, again, we need to make our expectations clear so that they know when they can take off. How do you manage your time? I think communicating, the manager communicating to them, how do you manage that time off?

When should, when is it appropriate? When is the work done enough? That you can take vacation. Like you [00:40:00] said, it's never done. If it's done, then why are you employed?

Mike: Right. Um, let's, let's pivot to, you know, I know it sounds self serving, but it's like all of these topics that we talk about in this show, it's like, I feel like 80 percent of them all come back to employee handbooks, job descriptions, and performance management process.

And timekeeping in this case, for those who want to keep records, you have to have a good system. That's going to keep track of the time off. Yeah.

you're, you're, you're the compliance half of, half of our, our, our, our mutual brain. Right? Uh, so yes, yes. Um, and I'm just thinking if I'm, if I'm an employer that, uh, okay, I'm going to, I'm going to switch to, uh, Uh, and unlimited policy. Cause I, you've got me believing that this helps me in my [00:41:00] recruiting and retention strategies, helps me to align to the marketplace, uh, and what employees want.

Now, okay. That means I'm going to have to set good expectations on. What does completed work even mean? What is, what is it that I'm asking of this person? What is, how does our team work together? Well, those questions are really answered in an employee handbook. This is how we work together. These are our policies, including possibly blackout periods, including the approval process that you go through to ask for time off.

And then you train on this process so that you just because it's unlimited doesn't mean you just take it whenever you still have to have it approved. It has to has to work with the rest of the organization and how they serve customers. Um, and then the job individual jobs themselves. You've got to have job descriptions that describe here's the expectation I have of you, right?

That it's not just a listing of tasks, it's a listing of the, uh, [00:42:00] expected outcomes from this job. So, and then that then ties to a performance management process, how you set expectations. And, Uh, you're in your review and, Hey, I didn't get to take as much of my PTO. Well, I, I, I would love for you to take more PTO.

The reason we didn't, I didn't approve that one or whatever instance that you're, that you're referring to is because, you know, here's the job description, here's, here's the performance management process we're talking about right now and how you missed, how can we shore that up to make sure that you get even more PTO next year, because I want you to have that time, but I've, but I've got to have these outcomes first.

So it's like, this is a yin and yang, if we're going to step into. This, dare I call it a modern world. Uh, I don't like that phrase. An evolving world, a modern strategy for, uh, recruiting and retaining employees. You've got to have your [00:43:00] house in order on the HR side. Uh, handbook, job descriptions, formal performance management process.

Cause otherwise they, you know, you're going to be out of sync and you're going to have, You're going to have, ironically, unhappy employees with an unlimited PTO policy.

Mary: I, I agree. And I, what I really like about what you're saying is that the, everybody listening needs to understand how it is all tied in together. None of your policies can operate in a vacuum. They have to be in sync with each other. And again, in sync with your growth, um, goals, right? So, you know, maybe if you're in a, in a.

Point in time where you're really in a growth mode, Mike, and you have the employees that you need. Maybe you find a different incentive, maybe having unlimited PTO right now, because you know, everybody, you know, you can't afford to have people out for eight weeks. [00:44:00] Maybe we find a different incentive, a really nice 401k policy, you know, a really, really nice benefits package.

There's plenty of other things that you can do to attract and retain talent. This is just one of them. It may not be right for every employer. I can tell you it's not right for every employer, actually. Um, and it also takes a lot of thought. Exactly what you said, Mike, your house needs to be in order. Your HR foundation needs to be in order.

That's exactly what we do when we go in and start helping a new employer. If they, Start out by saying, I want unlimited PTO. I'm going to have a thousand questions first, and I'm going to have to audit some of their current functions, HR functions, before we can write that policy.

Mike: I'd say maybe, one other point, if you're an employer that you think this is insane, uh, or you acknowledge the benefits and it doesn't [00:45:00] work for your organization for whatever reason, you're going to need to be prepared to defend your policy when today it's only 8 percent of U. S. companies. Provide this, that number is growing fast.

Um, you know, round up to 10%. If one in 10 applicants. Uh, your company are interviewing other places and they have their choice of who's, what place they go to work for. And that's going to be the case in the 4 percent unemployment world. Um, maybe your compensation is the same as your competitor's compensation across the street, but they offer unlimited PTO. If it doesn't work for you, it doesn't work for you, but be prepared to defend why to that employee and explain it. Correct.

Mary: And, and, and think of an alternative that may come close. So instead of giving, you know, way back when, I think, and there's still a lot of employers and, and I, I do understand some can only give one [00:46:00] week for every, every year, right? And then they cap it at four weeks vacation. Uh, I, I, we work with a lot of small employers that say, Mary, that that's all I can do.

Uh, but if you're a bigger organization or. If you know your competitors are offering unlimited, and you feel you can't do it, I feel like maybe you want to give four weeks vacation after two years, or just be a little bit more generous in the, in the PTO policy that you

Mike: Right. Yeah. You don't have to go. You don't have to go all in. You could just provide a richer PTO policy than your current policy that just tilts in this direction. You don't have to go all in to unlimited, right? Yeah. Um, Mary, I felt that you started going down a compliant, it's somewhat compliant, but it's also just practical.

And I think I, I [00:47:00] pulled this off track. I want to make sure we fully understand this, this topic of leaves. So. Um, uh, maybe I'm, maybe I'm pregnant and, uh, I'm going to go on maternity. Um, maybe I have a, uh, a sick family member that I need to stay home and take care of. I mean, there are state and federal leave types, FMLA, paid at the state for the paid leaves lot.

This is probably the fastest growing area of HR law, especially in the states, different leave types, paid and unpaid, um, in an unlimited policy. This just feels like a place where people could get themselves in trouble accidentally. Look, maybe, first of all, do you think we covered that or do you, uh,

Mary: a couple more pointers because I agree with you and, you know, you know, I'm going to talk about compliance forever. So [00:48:00] 1 thing that you need to consider is to just as I said before, the policy can't be a simple policy. It needs to be relatively complex. And we need to think about the state that you're in and any federal leaves that, um.

Also, uh, would be you'd be your organization would be eligible for. So let me give you an example. If you have a sick leave policy in the state that you're in again, there's about, I think we're up to 23 or 24 states that have sick leave policies. It's not enough to say we give unlimited PTO. You can take it for any reason.

Many of those states. A, make sure that you, uh, make sure that employers give a full policy on what that sick leave is to their employees, in their hand, which would be your handbook policy, and it is also posted. Now, why is [00:49:00] that, why is that important? I've seen cases where the employer said, I. Tell my employees they can take leave for any reason, but the particular state and in this instance, of course, it were not, of course, but it was New York, the New York DOL said.

But this is a sick, safe leave, and you did not prescribe in your policy the exact reasons they can take it. You said they can take it for any reason. We, we are saying that you list the reasons. So, there's a lot of nuances in many states like that where it is not enough to say you can take the leave for any reason.

It's unlimited, and you can take it for any reason you want. A lot of the DOLs will say, no, we have a sick leave or a paid family leave. You still need those policies written out [00:50:00] and described the way your state. Uh, regulations say you have to have it. Big mistake. I see it all the time. It's, it's in a written document.

So, attorneys are going to come after you and it's super easy to prove. So,

that's can,

Mike: it, it seems self-evident how you could get in trouble if you denied the leave. Say, Hey, we have an unlimited policy. That's the only one we're gonna pay attention to. And someone met the criteria of a state leave and you said no, because this is our, our blackout.

Mary: busy time,

Mike: So that seems obvious, like, no, you have to follow state law.

They were allowed leave but that's a good point, Mike. That's a good point.

right? So, so, so you got to be conscious there. But what if you are in fact granting the leave? Is there any risk factors to the employer then?

Mary: It needs to be designated why they're taking the leave. So if somebody is out [00:51:00] on for FMLA designated reason, and you are eligible for FMLA or a paid leave, again, you got like 20 states with paid leave and about 24 with sick leave policies of some sort. And, you know, over 50 employees, you're eligible for FMLA.

It should be designated that those leaves, each of those leaves have paperwork that the employee needs to fill out. A lot of times their health professional needs to fill out a leave as well. Again, you're not granting 12 weeks off under an unlimited PTO policy. In most cases, the manager's going to say.

You know, no, that's too much time off, but if they were taking the leave for an FMLA reason, you have to give that time off if it's designated. Blackout period or not, if I [00:52:00] am eligible for FMLA at an organization that is eligible for FMLA, I take that leave. I would, you, you, there's very rare instances where you can deny that leave.

Mike: Tell me, tell me if this, if this is a good use case. So I'm a dad. I work at a company. I've got unlimited, uh, PTO and I gotta, it's a good company. They, you know, I say, Hey, you know what? My, my daughter's got this, uh, thing. She's going in for an MRI. I need a couple of days off. Uh, no problem, of course, paid time off.

Well, man, we left the MRI and now we gotta go do these tests, these tests, these tests. And all of a sudden, uh, a few days turned into a few weeks. And now, uh, turns out, man, she's gotta have such and such treatments. And I'm gonna have to be home with her and taking her to and from the doctor for, for treatments for the next, uh, three months [00:53:00] now, all of a sudden employers like, well, we've been paying this is paid time off.

We have an unlimited PTO policy, but it was, we never meant it for to just to be completely open ended. The reality is all of that scenario. You can tell me if I'm wrong, everything I described there qualifies as federal. FMLA, but that wouldn't be paid. Right. Cause Fed is unpaid. How should the employer treat that?

Because they just benefited the doubt. They thought this was going to be, everybody thought this was going to be a three day thing, then a three week thing, then a three, six month thing. But how do I go back and retroactively do I stop paying them? Do I, do I claw back pay? I mean, how do you handle a situation like that?

Mary: Well, I would have preempted it, right? So that's why we do HR 101 training with managers. Managers don't need to be experts in HR, but you need to understand as a manager, when I hear that my employee is going to be out to care [00:54:00] for someone, please go to human resources and discuss the leave with them. At that point, They should have received the FMLA paperwork that should have been designated FMLA leave for most of the organizations that I support, they would give a certain amount of time paid that you're out for the unpaid leaves or the leaves like the state family leaves.

Mike: Give me an example there, because if I told my boss that I'm going, I'm going to be out for the next two days because my daughter's got a bunch of tests at the hospital, and they said, okay, that's FMLA. I'm not paying you, even though I'm an unlimited leave policy. I'm thinking my boss is a horse's. You know what?

And how dare you not pay me? Because I'm thinking my daughter, the hospital, none of us knew that this was going to lead to a three week, three month thing. So how do you write that policy to pay them for the first three weeks? X period.

Mary: Yeah, so let me, let me finish your [00:55:00] question about, would you claw it back? I would not advise clawing it back. That might look like retaliation because you're on a leave, I'm punishing you, et cetera. And honestly, the onus there. Is, you know, somewhat on the employee, but it's on the employer to designate the leave as FMLA.

So, I would let that, that time go, but you do want to make sure that you're designating the leaves for the reasons. And as an organization, when I write this policy, I have to make a decision. Uh, four to five weeks is what I've seen in most of the policies that we've written. You get Four or five weeks, let's say, paid when you're out on FMLA or an unpaid leave.

And then the rest is, you know, the typical, you know, you're not paid because it's FMLA leave. So the paperwork has to be given, documented. Again, FMLA paperwork is, stays with the employer. [00:56:00] Um, you're doing it so that it is documented in case you were ever audited or there was any issues. You, you denied me FMLA leave.

We want to make sure we gave the paperwork. So, obviously, so that you're covered.

Mike: Yeah. So I think punchline here is. You have to, there, there are a lot of corners to see around if you're going to implement a policy like this, because there's so many unintended consequences. And I know we're approaching time. So maybe, maybe I'll, I'll give my shot at recapping some of these. And I'm going to want to give you the last word.

Um, my guidance to employers would be unlimited PTO. I'd say is a good thing. Um, it's competitive. If, if it's not, if you're in a, if you're in a tech sector in certain geographies, you might be a laggard if you don't do [00:57:00] this. I think it's safe to say for most of the country, um, this is an up and coming thing that for a period of time could be a competitive advantage for you.

If you listed the words. Unlimited PTO in your job posting, you might get flooded with really, really good applicants. Cause I'd say it's a competitive advantage for you until it isn't when everybody else does it. Um, and, and, and if, and if, and if things change, you can always change it back to, and, and, and go back the old way.

Um, so I, I would encourage folks to at minimum, think about it as outrageous as it might sound. Think about it cause there's a lot, there's a real benefit for recruiting, uh, in retaining. Um, but it's going to force you to keep your, get your act together. You're going to have to have a great handbook. That explains all these policies so that you are tracking state and federal laws around leave types, FMLA example that we just walked through.

And [00:58:00] do these overlap? Do I pay for a certain amount of these? Do I not pay? Cause you will get, you will, the employee or you will end up feeling trapped into corners that you didn't see coming if you don't do this. Um, it's also going to force you to have great job descriptions. And a performance management process that people know what is expected of them.

What are the, what is the outcomes expected? So if I, why, why can you tell me I can take unlimited time off? I think I'm done with my job, but the, the, your, the employer's like, well, you finished that task, but boy, here's a million things you could be working on and we're behind as a team. It's like, you got to have good job descriptions, good expectation setting, good performance management processes.

So lots of goodness here. That you should be exploring, but if you don't think this through deeply, lots of unintended consequences from a compliance perspective and an employer relations, uh, perspective, do it badly, it could blow up on [00:59:00] you. So that, that that's, that's my guidance. Mary, I want to give you the last word.

Mary: Thank you. And I, I agree with everything you said, of course. And I think, I think it's a good idea to consider new things. Listen, if you're in a service industry, this might not work. It might not work in a manufacturing, uh, industry, especially if you have, you know, 24 7 operations, but I think it's worth considering.

I think you need to tie it to, uh, uh, What your growth strategy is, what are you looking to do? Why do you want to do the policy? Once you decide that you do want to do it, we talked about the pros, right? Retention, um, attraction. Uh, you know, managing time and productivity. We talked about the cons and that is that, you know, people might take too much time.

People also might take too little time. And that, that is another issue. People, you know, do have, you know, breakdowns and, and [01:00:00] they need to take their time off if they get too much work and then how are you going to protect yourself? If you decide to do it. That handbook, as you said, is paramount. It needs a lot of thought, uh, and I think that you need to think about your HR function holistically and then fit this policy into that function.

And you might need to do, do some extra work, the job descriptions and setting expectations, training your employees and your managers, um, when this policy gets rolled out.

Mike: Yeah. Yeah. Very good. Uh, lots to think about on this topic. I'd say it is growing and it's not, I don't see it going away anytime soon. So whether you're considering it or you're just going to have to compete against those firms who are offering it to the same people you're trying to hire in the same place you're trying to retain, uh, you gotta get smart on this topic, uh, no matter what you do.

So Mary, thanks for the [01:01:00] conversation.

Mary: Thank you. It's great.

Mike: Yeah. And, uh, to everybody for joining us today, uh, the war for talent ain't going away. This thing is baked for a very long time. You need to be considering strategies to, to recruit and retain the kind of people, the kind of skills, the kind of talent that you need to grow your business.

And we appreciate you letting us be part of your mission to grow until next week. Thanks.

Outro: That's it for this episode of Mission to Grow. Thanks for joining us today. For show notes and more episodes, visit us at missiontogrow. com. If you found this content valuable, I invite you to share it with a friend and subscribe to the show. If you really want to help, I'd love it if you left a five star review on Apple Podcasts, YouTube, or wherever you listen.

Mission to Grow is sponsored by Asure. Asure helps more than 100, 000 businesses get access to capital, stay compliant, and develop the talent they need to grow. To learn more about how Asure can help your business grow, visit AsureSoftware. com. [01:02:00] Until next time.

Creators and Guests

Mike Vannoy
Host
Mike Vannoy
Mike is a digital-first marketing executive with 25 years dedicated to helping HR companies thrive. As a board member of an AI software company and Chief Marketing Officer at Asure, he's been at the forefront of AI, HR compliance trends, and the changing demographics that shape today's marketplace. Under his leadership at Sales Engine Media, the company predominantly focused on the payroll, HR, and benefits industries, earning multiple spots on the Inc5000 list. Actively involved in multiple small businesses, Mike is a lifelong entrepreneur adept at navigating the changing workforce dynamics. He has held multiple executive roles at industry-leading HR firms, showcasing his expertise and leadership in the sector.
Unlimited PTO: The Positives and Negatives of Unlimited Paid Time Off - Mission to Grow: A Small Business Guide to Cash, Compliance, and the War for Talent - Episode #119
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