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Paying PTO Forward


A new survey finds more than one-quarter of companies saying they allow employees to donate paid time off (PTO) to their colleagues. Experts see plenty of positives in leave donation programs, but urge human resources professionals to consider a variety of factors in implementing such policies.

Good companies want their employees to take advantage of the vacation days they are provided. And it seems some of these same organizations would rather see workers donate those days to colleagues in need than let them go to waste.

A new report from the Brookfield, Wis.-based International Foundation of Employee Benefit Plans, titled Paid Leave in the Workplace, finds 30 percent of employers that offer paid vacation allow workers to donate paid vacation days to colleagues who are dealing with a catastrophic illness or personal emergency, for example.

The survey of 497 employers sees this generosity extending beyond vacation days as well, with 28 percent of companies with paid-time-off plans saying they permit employees to donate paid time off. Twenty-two percent of organizations that provide paid sick leave allow workers to donate sick leave.

Such findings signal a "slight uptick in companies allowing leave donation to workers," says Julie Stich, associate vice president of content at IFEBP.

There are plenty of positives in instituting a leave donation program, she says. "It reduces turnover by allowing an employee in need to take time off with pay so they won't need to quit or lose their job. It can reduce unscheduled absences, it builds camaraderie and morale, [and] it serves as a recruitment tool — making the company an employer of choice — and it reduces accrued leave liabilities on the company's financials."

Such programs are often set up to support employees who are dealing with health events — theirs or a family member's — and have exhausted all available paid time off, says Sander VanderWerf, a vice president in Aon's U.S. absence management practice.

In other cases, a company might offer donation programs for employees affected by a natural disaster, says VanderWerf.

"Organizations that have or are trying to develop a sense of community among employees are more likely to offer donation programs. Disaster-related leave donations can be especially helpful in fostering a sense of community when employees are looking for ways to help colleagues in affected areas."

While the pros to implementing a paid-time-off donation policy are indeed many, there are still many factors to consider before doing so.

For example, employers must "overcome the misconception that leave donations can be paid out in cash as an alternative to leave," says VanderWerf. "Good employee communications here are key, as an IRS-qualified program must be a bank available to all eligible employees, which 'pays out' benefits in the form of days of paid leave. Neither cash payouts or targeted donations are permitted."

Employers also have several decisions to make about eligibility and amounts, says Stich.

For example, HR leaders must determine which employees can donate leave, and if there are service or position requirements, or caps on the amount of leave that one employee can pass on to another.

"Employers must also be familiar with the tax ramifications of donation," adds Stich. "These are spelled out by the IRS."

For organizations with a "use it or lose it" leave policy — in which unused leave if often forfeited — allowing donation could increase the company's leave budget as well, she says.

Budgetary concerns aside, employers and human resources must also determine the value of the leave donated.

"Will it be at the donor's rate of pay, converted?" asks Stich, adding that a leave donation benefit can also create administrative challenges.

"Staff will need to process and track requests and donations, account for the monetary value of the donation and manage employees' return to work," says Stich. "And, as with any type of benefit, donation programs should be clearly communicated to employees."

Claire Bissot, managing director at Leawood, Kan.-based CBIZ HR Services, urges HR leaders to create a policy that addresses these and other potential issues.

For instance, allowing employees to donate paid time off to colleagues could actually cause "unnecessary 'solicitation' in the office," says Bissot. "Much like the rules around employees not selling Girl Scout cookies or wrapping paper [at work], the same could happen here. Employees could feel pressure to donate or be judged by others for not donating."

Bissot also suggests capping the number of days that workers can donate, "so that [employees] can still have some time [left] for themselves," as well as considering accepting donations once every two years to ensure employees still take the time they need, and making donations anonymous.

After weighing these various factors, the decision to make leave donation available to employees ultimately hinges in large part on the company's culture, says Stich.

Posted In: Employee Benefits; Human Resources, General

Want to know more? Read the full article by Mark McGraw at Human Resource Executive Online

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