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4 Things Every Employer Needs to Know About Paid Time Off (And 4 Actions You Should Take)

  • Human Resources
  • Article
  • 6 min. Read
  • Last Updated: 03/27/2017

Employer information about paid time off.
Millennials, and Americans in general, don't take enough paid time off compared to employees in most other countries. Here's what you should know about PTO as an employer.

Table of Contents

One of the biggest misconceptions about the Millennial generation — who now make up approximately 50 percent of the U.S. workforce — is that they don’t work as hard as previous generations. It’s simply not true.

For example, a survey taken last year found that Millennials are the “most likely generation to forfeit time off, even though they earn the least amount of vacation days.” Another survey, conducted by Nielsen research based on 2,068 adults aged 25 years or older, found that 52% of people didn’t take all their paid vacation days in the past year, leaving an average of 7.2 days unused. To add to the problem, a whopping 23% of these workers haven’t taken a vacation in the past 12 months!

The fact is that Americans don’t take enough paid time off compared to employees in most other countries. According to this report in The Week, Americans get an average of 16 days’ vacation and holidays off per year, which is ahead of only Japan for the least number of days among industrialized countries. To compare, workers in France get 30 days off mandated per year. Austrian and Portuguese workers are required to take 35 days off per year, including holidays.

But things are changing. More employees are demanding more time off — particularly to care for newborns or sick family members. Many companies are recognizing this need and stepping up to offer more generous paid time off and family leave policies. As a result, they believe they are attracting better people to their organizations. Are your PTO and family leave policies up to snuff? Thinking of making changes? Here are four things you should know — and actions you can take.

1. Paid time off and family leave are different

When a company offers paid time off to its employees those days can generally be used for anything — vacation, sick time, etc. Family leave, however, is specifically designated for the caring of others, particularly newborns, the elderly, a close family member with a serious illness or when there’s an emergency. Employees who work for employers covered under the Federal Family and Medical Leave Act may be eligible for unpaid family leave and as noted below, some cities and states require employers to provide time off for family leave.

Action: Consider vacation, personal, sick, and family leave when creating or revising your paid time off policies.

2. Many states and cities already require paid family leave policies

There are now three states — California, New Jersey, and Rhode Island — that provide for partially paid family leave. New York has passed a family leave law which will be effective next year and the District of Columbia has passed similar legislation currently under congressional review. All of the programs in these states are funded by employee-paid payroll taxes. In addition, all of these jurisdictions with the exception of New York State, plus seven other states also require certain employers to provide unpaid, job protected family and medical leave for most employees. These leaves generally provide up to 12 weeks of unpaid leave for qualifying family and medical reasons and run concurrently with the Federal Family and Medical Leave Act.

The trend doesn’t end at the state level. San Francisco recently passed a Paid Parental Leave Ordinance and similar legislation is under consideration in several other states and local jurisdictions.

Action: Family leave is a growing trend, and depending where you're located, employees may already be eligible to take this time off. Take this into consideration when creating or revising your paid and unpaid time off policies.

3. Donald Trump supports a national paid time off policy

President Trump recently re-stated his intentions to move forward with his paid time off proposals announced during his presidential campaign. He wants new parents and perhaps others caring for sick family members to receive up to six weeks of paid time off guaranteed by the federal government through unemployment insurance benefits. This plan would be in addition to the Federal Family Medical Leave Act which provides for unpaid time off for qualifying reasons to employees working for large (50+ employee) companies. Trump may have a fight on his hands with others in his party, particularly House Republican Leader Paul Ryan, who has indicated his opposition to the expansion of any such entitlements.

Action: There is a possibility for a federally mandated paid leave in the next few years, as well as the passage of legislation at the state and local level. Continue to monitor trends and developments in the area and take them into consideration when creating or updating your paid time off and family leave policies.

4. Your PTO policy likely pales in comparison to some big corporations

Get ready … this is probably going to upset you. Why? Because when you see what bigger, well-known companies are offering to their people in the way of paid time off, you may not be happy.

There are many examples you can draw upon for research such as this article in Inc. In it, you’ll learn that Ikea offers four months of paid parental leave to both full-time and part-time workers who have been with the company for more than a year. American Express does the same … but for five months (and moms get access to a lactation consultant and free shipping of breast milk). Accounting firm Deloitte offers unpaid “sabbaticals” and shoe company Timberland lets their employees take up to 40 paid hours off per year to spend on volunteer activities. If you’re a small business, it’s tough to compete with policies like this. But your employees — and prospective employees — are watching and reading.

Action: The good news? Many people prefer working at small businesses as opposed to large corporations. Look at some of the paid time off plans offered by corporations and provide a variation of what they do. No one expects you to be the same. You’re small. But emphasize the flexibility available, growth opportunities and the contributions an employee can make when working for a small company

The bottom line? Today’s workers need time off and want more work-life balance. Study after study finds that workers are stressed. Many would prefer more flexibility, independence, and mobility over a higher salary. This is why having a strong paid time off policy can be critical if you want to attract and retain the best and brightest people from this generation.

gene marks headshot

Gene Marks is a business owner, small business expert, author, speaker, CPA, and columnist for The Washington Post.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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