How to Evaluate Employer Benefits Packages (Part 4): Time Off Benefits
So far in this series, we’ve talked about medical benefits and retirement. Those aren’t necessarily fun to think about, but they are important. In contrast, everyone loves daydreaming about a trip to a vacation paradise or taking some time off to spend with their family. To make those dreams a reality, you first have to understand the different types of time off benefits that employers offer and how to manage your vacation account balance well.
Every Company Has a Unique Time Off Plan
All time off benefits enable you to continue earning pay even when you’re not working. Unlike with medical and retirement benefits though, there aren’t many government regulations dictating how businesses must structure their time off benefits. That means companies have a lot of freedom to create the type of plan that works best for their business operations and employees. It also means this is the benefit where you could find the most variation from employer to employer.
Here are some things to look for as you compare time-off benefits:
- The rules regarding the number of vacation days you accrue (earn)
- When and under what situations your time off can be used
- Whether you can cash-out, donate, or carry-over time off from year to year
Set Categories vs. Flexible Paid Days Off
Some companies offer a set amount of time off for different categories, such as holidays, vacation, and sick time. They will have policies that dictate how you earn and use the days in each category.
Many employers, particularly those with around-the-clock operations use a Paid Time Off (PTO) model because it works well with their 24/7 operating schedule. This type of time-off program groups holidays, vacation, sick time and personal time all into a single PTO bank. Each pay period, you earn a certain amount of time that gets deposited into your PTO bank. Typically, the longer you work for a company, the more PTO you will accrue. You can use the PTO balance whenever you take time off regardless of whether it was for a holiday, vacation or a sick day.
The advantage of having a PTO bank is that it gives you flexibility and puts you in charge of your time off. For example, if your schedule requires you to work on a holiday, or you rarely get sick, you are able to save your PTO to use later. On the negative side however, if you are someone that has a frequent need for sick days, you will not have as much available for vacations.
Tips to Manage Your Time Off Account Balance
Regardless of what type of time-off program you’re enrolled in, it’s important to manage your account balance so you don’t run out time off. Here are a few simple steps to help you with this task.
- Use your employer’s accrual schedule to determine how many days off you will earn each year.
- Budget how you plan to use your PTO days. Remember to include time for sick days and other unexpected needs that may come up.
- Be a saver! Try not to use up your time off as soon as you accumulate it. This is especially important in your first few years of employment, when delayed gratification will help you build up a cushion of PTO that you can use for emergencies. Everyone has their own ideal safety cushion, but I recommend saving at least two weeks to cover any waiting period before disability benefits kick in (watch for more on that in a future post.)
- But don’t save too much. We all need time for play and rest. Once you have your safety cushion in place, enjoy your time off without regrets.
Considerations for New Employees
If you have worked at your prior employer for a long time, you may have been accruing more PTO than you will be earning as a new employee at a different company. This may result in less time off than you were previously earning. That isn't something that would necessarily prevent you from making a job change, but it is something to consider.
While there is evidence that tenure-based PTO accrual schedules don't retain employees, most employers still maintain them. It simply "feels right" for longer-term employees to get rewarded with more time off. You will need to determine how important time off is to you. It may be worth asking about adjustments to PTO accrual. Some employers have programs that allow you to “buy” more time off. Others are developing accrual schedules that accommodate “mid-career” hires to make changing jobs attractive to more experienced employees. Such accommodations may not be advertised so it doesn't hurt to ask.
Next Time: Life Insurance
In the next article, we’ll talk about life insurance, including how much you need and why you should also have your own policy in addition to what your employer provides.
Written by Brian Mitchell
Brian Mitchell has experience leading Total Rewards strategy and implementation for large employers. He enjoyed helping his own millennial children navigate first-time employment and benefit selections. He hopes his insights simplify the process for you as well.
Benefit Boosts by Brian Mitchell© – Vol 2024-005
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