Over the past several years, it has become increasingly clear that benefits aren’t keeping pace with shifting employee demands and expectations. At a time when employees want more robust financial support and flexible benefits that meet their unique needs, too many HR teams are still reliant on traditional benefits such as PTO. Employees leave huge sums in unused PTO on the table each year, which means they’re not getting the full value of the benefits they’ve earned while companies are confronting large balance sheet liabilities.

HR teams are exploring innovative approaches to benefits that give employees a wider array of options while reducing risk for the company. For example, convertible PTO allows employees to use the value of their accrued time off for other priorities: retirement contributions, student loan payments, purchasing a home, investing, emergency savings, and so on. By enabling employees to redirect their hard-earned PTO toward their financial goals, HR teams will have a major competitive advantage over companies that haven’t moved beyond traditional benefits.

This will help HR teams improve engagement and retention rates when they meet the growing employee demand for flexible benefits. Employees want to be treated as individuals with specific financial constraints and aspirations, and they’re unsatisfied with the same old benefits that companies have offered for decades. Convertible PTO allows companies to set themselves apart and meet the diverse needs of all their employees.

Traditional benefits are falling short

There’s a significant gap between employers and employees regarding benefits satisfaction. Many employees are dissatisfied with the benefits their companies offer. While 83 percent of companies think employees are satisfied with their benefits, just 61 percent of employees agree – the lowest proportion in a decade. One reason for this disconnect is the insistence on providing benefits that employees aren’t using. Although PTO is among the most common benefits, it’s also one of the most underused – less than half of employees report taking all their available time off, averaging almost 10 unused days per year.

There are two major problems with traditional PTO. First, employees don’t always want to take time off, but many PTO plans are built around “use it or lose it” policies (nearly one-third of employees say their time off doesn’t roll into the next year). Unsurprisingly, our research found that three-quarters of employees take unneeded time off. Second, when companies do track the value of accrued PTO over time, this often leads to large balance sheet liabilities. In many states, companies are required to pay employees the full value of their accrued PTO when they leave, which can cause significant and unnecessary financial strain.

Traditional benefits don’t offer the flexibility employees need, and they sacrifice value when employees face serious financial headwinds. This is why HR teams should rethink the status quo and implement benefits that will better serve diverse workforces.

Why flexible benefits are critical for employees and companies

A recent published report* examined how traditional benefits fail to meet employees’ needs and offers a roadmap for implementing convertible PTO. The report covers the surging demand for flexible benefits among employees, how these benefits can be deployed and tracked, and the positive effects of flexibility on employee satisfaction, engagement, and retention. In other words, flexible benefits such as convertible PTO are a win-win for companies and employees.

The report found that 90 percent of employees say flexible benefits like convertible PTO would make them more likely to stay with their current employers. These benefits are particularly valuable for companies with diverse workforces, as there is significant variation in how employees would use the value of convertible PTO based on their race, gender, age, and socioeconomic status. For example, low-income workers are more likely to devote the value of their PTO to emergency funds than their higher-income colleagues. Younger employees would use the funds for student loan payments, while their older counterparts would increase retirement contributions.

Beyond limiting balance sheet liabilities, companies that adopt flexible benefits will see higher levels of employee satisfaction—70 percent of employees say such benefits would make them feel valued and appreciated. This can reduce turnover, increase productivity, and improve a company’s culture. It has never been more important for HR teams to make employee well-being a core focus, and that’s exactly what flexible benefits will help them do.

Now is the time for HR teams to explore flexible benefits

It has been a difficult few years for employees. After the mass disruption caused by the COVID pandemic, employees are dealing with stubborn inflation and the threat of an economic slowdown. A recent Bank of America survey found that just 42 percent of employees feel financially well – a significant drop from 57 percent in early 2022 and an all-time low. However, while 96 percent of employers feel responsible for employees’ financial health, just two-fifths offer financial wellness programs.

Nearly three-quarters of employees want help with their personal finances, while those who are financially stressed say they’re twice as likely to look for a new job. Flexible benefits can help employees take control of their finances by allowing them to address their most urgent financial needs. As debt levels rise and savings fall, HR teams can give employees a financial buffer by allowing them to reallocate the value of unused PTO toward paying off debt, covering expenses such as healthcare costs, and meeting many other financial obligations. It’s no wonder that 70 percent of employees say they’re interested in customizable benefits.

Flexible benefits like convertible PTO offer a range of other benefits: they enable employees to share accrued time off with colleagues who need it, which strengthens relationships; they help employees donate to nonprofits and causes that inspire them; and they attract new recruits to the company. All this can be done with funds already allocated toward PTO.

It’s clear that HR teams need to start thinking more creatively about how they can support their workforces, and a closer look at convertible PTO is a great place to start.

*PTO Exchange

www.ptoexchange.com