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Exploring PTO Buyback Plans

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As more and more people become vaccinated against COVID-19, we are seeing places start to ease up on restrictions and many places that had shut their borders to visitors are welcoming travelers once again. However, many people are still uneasy about traveling, and some destinations are not quite as welcoming to tourists as others. Some workers may have been displaced or otherwise experienced some form of financial hardship as a result of the pandemic and might not feel they have the means to travel at this time.

Whatever the case may be, many companies might be seeing that employees have accrued and are sitting on some larger than usual balances in their paid time-off plans. This can be especially true for organizations with generous policies or those who allow for a carryover of hours from one plan year to the next.

While there are many employers out there who encourage their workers to take time off, even if it’s just to spend a relaxing day at home, the truth is that a lot of employees often fail to take advantage of their paid time off benefits. They might feel like a day off will cause their work to pile up and make things worse when they return, or they might feel a sense of duty, responsibility, or even obligation to skip vacations and time off unless absolutely necessary. Other times, there may be scheduling conflicts or blackout periods when employees are discouraged from taking non-emergency time off. Some may actually be too busy to have the luxury of taking any time off.

To allow for these employees to benefit from their accrued PTO, some companies might turn to PTO buyback plans. These plans allow employees to ‘cash out’ their unused PTO and receive additional pay instead. This may sometimes also be used by companies to help spread out the cash flow or to decrease the PTO liability on their books. Allowing employees to cash out on earned and unused time can also be a creative way to provide some financial assistance to employees when undertaking a project to change your company’s pay schedule or, as we’ve seen with the pandemic, forced furloughs and limited business hours. Especially when PTO is an accrued expense for the business, cashing out part of these balances can be a win-win, decreasing the liability from the company’s books while taking care of employees during potentially difficult times.

Despite the benefits of a PTO buyback policy, the case can be made that employees who take some time away from work are happier, less stressed, and more productive. Not being able to take time off from work can quickly lead to burnout and employee turnover. Depending on the local laws and regulations, the cash-outs may be calculated at a lower rate than an employee’s regular wages, to encourage workers to actually take the time off instead. Exploring a solution like partnering with a service provider like Valor Payroll Solutions to take care of administrative and non-core business functions such as payroll and HR can be helpful to ease some of the burdens which might be making your staff feel ‘too busy’ to take time off.



Christina Hageny

Christina Hageny

President - Valor Payroll Solutions

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