PTO plays a central role in most benefits packages, but there's mounting evidence that HR teams aren't taking full advantage of it. Sometimes, PTO even creates significant cultural and financial problems for companies. For example, companies must consider the hidden costs associated with many PTO plans. Because PTO is such a widely underused benefit and many states require companies to pay out the value of unused time off when an employee departs, this is causing an explosion in balance sheet liabilities.

Unused PTO can also be harmful to a company's culture. It's an indicator that employees don't feel able to take time off — frequently due to pressure from deadlines or concerns about colleagues' perceptions — and many employees are losing the value of the PTO they've earned. Companies in states that don't require unused PTO payouts may avoid excess balance sheet liabilities, but one of their employees' core benefits is going to waste. This is no way to treat your workforce, particularly when burnout and turnover are major company concerns.

HR and financial teams have powerful incentives to reevaluate their PTO programs. By adopting more flexible programs like convertible PTO, companies will not only reward employees with benefits they will actually use but also improve retention and build a healthier workplace culture. They will also reduce the financial burden imposed by the hidden costs of PTO.

Companies are paying a premium for unused benefits

Traditional PTO has created a worst-of-both-worlds scenario for many companies. First, 78% of employees aren't using all their time off — a proportion that jumps even higher for younger employees. Three-fifths of Americans report that they're feeling burned out at work and 81% say they have an increasingly strong urge to take time off when work becomes stressful. It's clear that there's a gap between what employees need and what they're getting with current PTO programs.