Time to rethink PTO? How to convert employee hours into other benefits

HR teams are trying to navigate one of the most difficult economic environments they’ve ever faced. Surging inflation, snarled supply chains, and an extremely competitive labor market are all forcing companies to reassess how they do business, and the HR department has a vital role to play in this process. One of the most effective ways to increase productivity and avoid disruption is to focus on the development and maintenance of a healthy workforce.

Now is the time for HR teams to reaffirm their commitment to their entire workforce. This commitment means supporting employees at every level of the company with compensation and benefits packages that meet their unique needs, financial assistance to help them get through this period of inflation and looming recession, and flexible work arrangements. After two years of working remotely, employees are demanding greater flexibility than ever before; they want to be treated as individuals with their own priorities and concerns. Companies that recognize this fact will have a decisive advantage over their competitors.

HR professionals are under immense pressure to attract and retain talent, which is an especially difficult task when balance sheets are tight and employees demand more support to cover their own rapidly rising costs. This is why a creative, cost-effective, and flexible approach to compensation and benefits is more important than ever.

Meeting the needs of an increasingly diverse workforce

The era of one-size-fits-all compensation and benefits packages is over. Benefits packages need to address individual needs and concerns while being flexible enough to adapt to the different ways employees use their benefits. Hence, HR teams have to provide benefits that serve all of their people.

According to a recent PwC survey of over 52,000 employees in 44 countries, one of the top three motivators for employees who want to change jobs is the desire to “truly be themselves at work.” This priority was cited by two-thirds of employees, while 47% said the ability to choose where they work was their reason for switching jobs.

Our recent report about the state of paid time off (PTO) also found that nonwhite and female employees are less likely to use all their PTO than their white and male colleagues. Additionally, economic circumstances have a significant impact on how employees use benefits — 72% of employees who make over $125,000 per year use all their vacation time, compared to only 56% of employees with annual incomes of $49,000 or less.

Every employee deserves to be treated with respect and compassion, especially at a time when 75% of companies say diversity is a stated value or priority area. In fact, 76% of job candidates report that diversity is an important factor when evaluating job offers.

Provide benefits your employees will actually use

What’s the point in offering a benefit if your employees don’t use it? While traditional benefits like PTO are still fixtures in many companies’ compensation packages, evidence suggests that it’s time to reconsider the status quo. According to a study conducted by Oxford Economics and Ipsos for the U.S. Travel Association, American workers fail to use hundreds of millions of vacation days, which costs companies tens of billions of dollars per year.

This research corresponds with our own findings: 60% of employees struggle to use all their PTO, while 75% have taken unneeded vacation to avoid losing the time they’ve accrued. This is a reminder that some benefits—like PTO—are actually a burden for employees, especially when they are reconsidering what they expect from their companies. To address this problem, HR teams should redirect their budgets to increase sought-after benefits like take-home pay while figuring out how to repurpose accrued or already-budgeted benefits like PTO.

When HR teams reorient their focus toward benefits that have a positive impact on their employees, they won’t just reduce turnover, increase morale, and boost productivity; they’ll also save the company money. As competition for talent becomes fiercer and economic pressures continue to mount, the impact of HR has never been more critical to the health of your company.

Flexibility is crucial in today’s workforce

Over the past two years, how and where employees work has undergone a seismic shift. The transition to remote work proved to be much more successful than many companies anticipated – 83% of employers would consider the transition to remote work successful, while 87% of employees prefer to work remotely if given the opportunity. However, these numbers are part of a larger trend: the demand for flexibility across the board.

A recent Deloitte survey of American professionals found that 94% would benefit from greater flexibility at work. A survey conducted by the Society for Human Resource Management reports that 83% of employers regarded flexible work as the most important benefit during the COVID-19 pandemic, second only to health care. These numbers demonstrate the importance of developing an HR platform that addresses employees’ individual needs.

To create a more flexible working environment for employees, HR teams can start by reviewing the breakdown of wages, PTO, 401(k) contributions, medical assistance, and other benefits. Once HR leaders have a clear picture of how benefits investments are being allocated, they can determine how to make those benefits more flexible. For example, companies can make PTO convertible into other benefits employees want (such as health savings accounts or student loan payments), create employee emergency funds, or provide early wage access.

The key to fully leveraging your benefits budget is ensuring you’re aligned with employees’ needs and priorities. This won’t just help you allocate that budget more efficiently; it will build trust with your employees and put your company in a much stronger position to support them through one of the worst economic downturns in years. For HR pros, Bob Dylan’s lyrics are truer today than they’ve been in a long time: the times they are a-changin,’ and the way you treat your employees has to change, too.

Rob Whalen is co-founder and CEO of PTO Exchange.