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Elimination of Vacation/PTO Accruals for Executives
Benefits & Compensation
Elimination of Vacation/PTO Accruals for Executives
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
In order to reduce our vacation/PTO accrual liability, we are exploring the option of removing vacation/PTO hours for our executive team (we happen to use PTO hours but others may have done something
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Elimination of Vacation/PTO Accruals for Executives
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/19/2010 8:59 AM EST
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Posts: 7
First: 9/9/2002 Last: 1/19/2010 |
In order to reduce our vacation/PTO accrual liability, we are exploring the option of removing vacation/PTO hours for our executive team (we happen to use PTO hours but others may have done something similar in the vacation/sick environment). Rather than earning additional PTO hours executives will just take time when they need it. There would be no time reporting requirements.
Has anyone else implemented this or something similar? If so, what happened to the PTO/Vacation balance that was remaining at the time of implementation? Was it paid out - or, allowed to run out? It would also be great to hear about the success of obstacles of implementing this change. Thanks! |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/19/2010 11:41 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
"executives will just take time when they need it. There would be no time reporting requirements. " I am sorry but this is a HUGE red flag for me. If no one is watching and there are no limits, there is a huge potential for overuse.
Also what happens if an executive has a heart attack and is out for many weeks/months? How long are you going to pay wages? If you aren't tracking what they have taken, are you going to have a maximum for any one time leave? What happens if you have an executive who decides to take off every Friday afternoon to golf? Do you have an STD/LTD insurance program? Will this be integrated into any timeoff? Are you covered under FMLA? Unless you want to job protect executives for an unlimited amount of time, you need to be tracking any instances that fall under FMLA. While you can just judge on performance alone and not care about worked hours, unplanned absences on any given day can affect the performance of others....and I can just imagine the reaction of non-executives when they see the executives take whatever time off whenever they want. Just one more "us vs them" issue between exec/mgmt and non-exec/non-mgmt. Personally I would never consider this policy because I suspect the actual cost/usage to the company would be much more than the accrued liability. It just wouldn't be 'on the books'. |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/19/2010 12:34 PM EST
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
This scares me, too. While most execs won't take much of their annual entitlement, there's always a good possibility that someone will abuse it.
I don't know if you're proposing eliminating PTO balances for these execs - it rather sounds like you are. If so, check your state laws since some states will prohibit this. I think I'd prefer just establishing a PTO cap. In California, for example, employers can cap PTO accruals at 150% of annual entitlement beyond which no more PTO will accrue until some is taken. I think this will be a much more easily administered way of controlling your accruals |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/19/2010 1:29 PM EST
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Posts: 7
First: 9/9/2002 Last: 1/19/2010 |
Thanks for the replies. You absolutely bring up some good points. Not about the abuse aspect - since the executives are paid/rewarded based on achievement of their annual goals and objectives - I'm not concerned that they would actual abuse the time. However, the reporting of FMLA eligible leaves would definitely be a concern and one that we will need to consider. As I said, we are currently just exploring this option. Most of the SVPs that I have talked to about this said that they never take vacations. Even when they are on personal trips they are always on BB or e-mail. |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/20/2010 2:22 AM EST
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Posts: 1771
First: 10/24/2002 Last: 9/14/2011 |
The abuse potential scares me too. We have eight executives here and while two of them don't take vacation time at all, there are two others that I'm 100% sure would each take several months per year. While they might lose some of their discretionary pay, I don't think they'd mind too much. And while we might say "oh well it doesn't matter if they take long vacations because we don't have to pay them as much" I don't think we would say that because:
* we'd still like them to be HERE most of the year, for a large variety of reasons; and * if we're not paying them for results achieved that means (gasp) RESULTS AREN'T BEING ACHIEVED! (And that's an issue.) OP, I don't know if any of your executives are like my two, but even if they aren't now, I think you need to wonder if any of them might BECOME like my two when they're handed unlimited vacation time. |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/20/2010 4:42 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
There is also a lag time between taking too much time off and it showing up in performance numbers/goals. Even your best executive could take quite a bit of timeoff before it affects performance results. And honestly you never know who is having marital problems, health issues, midlife crisis, debt/financial problems, etc. So the abuse could happen long before it is actually seen in the financials. By then it is too late to correct it.
If you allowed them unlimited use, I would still require that it be tracked somehow and that there is a notification system so that the rest of the company (on a need to know basis) knows where they are. Another thought is what if they get hurt during normal work hours where they had taken off without notifying anyone and now want to claim it under Workers Compensation? How will you prove whether they were working or not if you haven't tracked their time? I am a firm believer in tracking all work time...if for nothing else than to cost out what a project actually costed. |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/20/2010 8:53 AM EST
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Posts: 217
First: 3/22/2005 Last: 8/29/2011 |
Our organization is also looking into this type of "plan" as a way to reduce our liability. Our PTO plan is very rich and we have a heck of a lot more than 8 executives (hundreds). Doing a market survey we discovered that many large corporations have gone this route for this very reason. Few of our execs use any of their time - anyone who has abused the current plan is no longer here. We are looking at several options from a very low cap (two weeks) and letting their existing time run out to a plan with a combination of sick and PTO.
With the potential of millions of dollars of liability on the table, I think more organizations are going to have to come up with other solutions just to stay in business. Your ideas about FMLA and managing expectations are spot on but I think HR needs to be a partner in finding solutions and creating the policies and framework for implementation. |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/21/2010 5:42 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
From an HR standpoint, I think capping is a much better way to go if the employer hasn't capped in the past. Every employer I have been at has been in states where "use it or lose it" is legal. But even in states where that is not legal, caps still are.
You can still cap at a reasonable amount for executives (4-6 weeks a year or something). But I wouldn't go from accruing a large balance with an ever increasing liability to a wide open liability. But I would put a limit on how big the liability can grow. There would still however be a liability in a capped plan. |
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Elimination of Vacation/PTO Accruals for Executives
posted at 1/21/2010 6:57 AM EST
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Posts: 155
First: 8/24/2009 Last: 2/9/2010 |
We donât know your company and therefore we donât know what is going on within your Executive group. So our responses are based upon personal knowledge and experience.
The engagement level of senior leaders, on a national basis, is decreasing (according to the Corporate Leadership Counsel). This translates into lost dollars/revenue/profit and so forth. While obviously we all want to trust our senior executives research shows that the majority of American workers do not. Consequently placing an unlimited pool of paid time off in their hands may not be a wise business decision. |
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