It has long been clear that conventional benefits aren’t meeting the full range of employees’ needs. To take one of the most prominent examples: while PTO is the most ubiquitous benefit, it’s also among the most underused. This problem is exacerbated by the fact that many companies have “use it or lose it” PTO policies that make employees feel like they don’t have a choice in how they take advantage of the benefits they have earned.
This status quo is becoming a significant liability for companies. A growing number of employees are demanding greater flexibility in the type of benefits they receive and how they use those benefits. Meanwhile, existing PTO policies can create large balance sheet liabilities, as many companies have to pay employees for the value of their unused PTO when they leave. One way to solve both of these problems at the same time is through creative approaches to PTO, such as leave sharing. Under a leave-sharing program, employees donate their unused PTO to a company-wide pool, which colleagues can draw upon in times of need.
Leave sharing offers several advantages: it helps companies attract and retain talent, allocates benefits expenditures more efficiently, reduces unfunded liabilities, and perhaps most importantly, improves organizational solidarity and employee morale. These are critical advantages for HR teams trying to differentiate themselves from competitors and build more engaged and productive workforces.
What is leave sharing?
The IRS has approved two scenarios for leave sharing: medical emergencies and federal disasters. When employees or their family members have suffered severe hardships that require them to take an extended absence from work, leave sharing can be a vital resource.
Employees must donate to a shared leave bank instead of specific colleagues, and companies can also make contributions. HR teams must inform employees that their leave contributions cannot be written off as charitable donations or expenses, while any shared leave they use will be taxed as regular income. Employees can deposit as much of their accrued leave as they want, and leave can be returned if it isn’t used. HR teams are responsible for developing clear policies and procedures on leave sharing – employees must formally request leave in writing and be aware of how they can donate leave if they wish.
Leave sharing enables employees to help each other, strengthening cohesion in the workplace and increasing well-being. It also provides a safety net for employees confronting medical emergencies and other disasters. For these reasons, HR teams should familiarize themselves with leave-sharing programs and discuss the logistics and parameters of these programs with their employees.
Current benefits aren’t meeting employees’ needs
Benefits aren’t keeping pace with evolving employee demands and expectations. According to Pew Research Center, just 48 percent of employees take all the PTO they receive. This is one reason it’s no surprise that just 61 percent of employees say their companies offer benefits that meet their needs. There has also been a stark divergence between employee and employer perceptions of benefits. While there was a three-point gap separating employer perception of employee satisfaction and actual satisfaction in 2018, this gap has widened to 22 points.
Employers are also significantly underestimating how much employees struggle across many measures of well-being – financial, mental, physical, and social – and failing to adopt policies that could narrow these gaps. For example, 70 percent of employees are interested in customizable benefits such as leave sharing, but many companies fail to offer these benefits. Instead, they’re continuing to provide inflexible benefits such as traditional PTO – even though the average employee leaves almost 10 unused days on the table annually, and nearly a third of those employees say these days don’t roll over into the following year.
At a time when competitive benefits are among employees’ top reasons for staying at their companies, HR teams are missing a tremendous opportunity. This is why it’s time to consider a new approach to benefits, and the implementation of innovative policies like leave sharing is a great place to start.
The advantages of leave sharing
Employees’ perception that the company cares about them is an essential element of a healthy and productive workplace. A recent MetLife survey found that employees who feel cared for are 92 percent more likely to be engaged at work, 65 percent more likely to be loyal, and 56 percent more likely to be productive. Adopting a leave-sharing program is one way to show employees that the company and their colleagues care about their well-being.
Employees want to be treated like individuals with unique needs and priorities. Our research has found that 90 percent of employees would be more likely to stay with their current companies if they received flexible benefits. One such benefit is convertible PTO – time off that can be repurposed for other financial priorities, like emergency cash, health savings accounts, or retirement contributions. Employees wouldn’t just be eager to reallocate their PTO to address their financial needs – 80 percent said they would be willing to donate their time off in an emergency. HR teams should provide this option with leave sharing.
Although employees increasingly demand flexible benefits, just 27 percent say their companies offer a high level of flexibility. Too many companies remain reliant on traditional PTO, even though employees either fail to use all their vacation time (which creates large balance sheet liabilities) or take “unneeded” time just to avoid losing what they have earned. There’s no reason for this inefficient and counterproductive status quo to persist, so innovative tools like leave sharing should play a growing role in companies’ benefits packages.
