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Paid time off is one of the most valued factors individuals consider when looking for employment opportunities. In fact, according to a survey conducted by Glassdoor, 4 in 5 employees want benefits or perks more than a pay raise. The good news for employers? Paid time off is one of the least expensive benefits when compared to health insurance and retirement plans. While most organizations agree that offering a generous PTO package helps recruit and retain employees, there is some discord about the way in which it’s offered.

There’s been a recent increase in the number of days people are taking off of work. On average, an American worker takes 17 days of paid vacation each year. While this is the largest number seen since 2013, it’s still not enough. In fact, nearly 768 million U.S. vacation days went unused in 2018. In theory, this might sound like an advantage for employers. However, unused vacation days present massive risks and hidden costs to organizations. According to a study conducted by Oxford Economics, American companies carry $224 billion in liabilities due to unused vacation time. In addition, employees who don’t utilize their vacation time are more at risk of burnout, which can lead to increased absenteeism, lower productivity and poor mental health. When employees don’t take time off of work—both physically and mentally—their performance pays the price.

To encourage employees to utilize their paid time off, many organizations are doing away with the old system of categorizing time off as “sick,” “vacation,” and “personal,” and instead opting to bundle them together. Streamlined PTO plans offer a variety of benefits to both the employee and the employer.

For employees, a streamlined PTO approach offers greater flexibility. Employees have the opportunity to make their own decisions with how they want to spend their days off. Whether they use it for vacation, illness, personal, or medical appointments, the decision is theirs to make. In addition, many employees find comfort in the privacy a streamlined PTO plan offers. Employees have the freedom to keep sensitive matters, such as family issues or private illnesses, to themselves rather than discussing it with their boss or supervisor. In addition, allowing employees to make their own decisions can help improve overall morale and trust within the workplace.

For employers, streamlined PTO policies have less administrative costs as all days off fall under the same category. Instead of tracking the reason for the time off, administrators can simply track the number of hours used. Employees are protected by the Americans with Disabilities Act, the Health Insurance Portability and Accountability Act (HIPPA), both of which set regulations on how employers can respond to employees’ health information. Because bundled PTO policies don’t categorize days off, employers are less likely to need information regarding reasons for an employee’s PTO request. Because employees have autonomy in how they use their PTO, most are less likely to take unplanned days off, resulting in less absenteeism for employers.

To help employees get the most out of the PTO benefit, employers should encourage their staff to take full advantage of their time off. This includes encouraging employees to fully “sign off” while on vacation, avoid contacting them, and approving PTO requests when used appropriately. Employees who use their PTO to support their physical and mental health are less likely to experience burnout and more likely to be efficient and effective in the workplace.

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