Paid-Time-Off Risks

If you manage or sponsor project teams, or depend on their deliverables, or if you manage or depend on services from internal organizations, you're probably aware that fluctuations in staffing levels can slow or interrupt the delivery of the capabilities or services you need. Staff level fluctuations can occur when employees are absent for health or personal reasons, or when they take time off for vacations. In recent years, a significant trend has changed the way employers allocate paid time off. Formerly, in many organizations, there were separate categories for vacation, sick time, and personal days, with each category having unique requirements and quotas. In organizations that have moved to a single pool of days for paid time off, employees are free to manage how they use their allocated days, with some constraints, and typically with minimal employer regulation.

The new approach usually works well, but there are some unintended consequences that manifest themselves as risks to those who depend on deliverables from projects, or services from internal organizations. Below is a review of the more significant paid-time-off (PTO) risks.

Holiday periods

During holiday periods, employees are more likely to take time off. That isn't new. But in PTO organizations, employees are generally freer to use their paid time off. Moreover, the can choose to apply what would have been personal days or sick time to cover days off during holiday periods. This behavior can cause an increase in staff absences during holiday periods, compared to what they were under the former regime.

Some organizations deal with this by essentially closing down during holiday periods. That strategy might not be an option for organizations that serve the public, or which provide goods or services for which customer demand is continuous. The holiday closing strategy can also be problematic for global companies, because a holiday period in one part of the world might not be a holiday period elsewhere. If your organization doesn't close for the holiday period, and if staff absences surge during that time, you might find it necessary to schedule critical work to avoid that period, or to pre-order supplies of items that might be difficult to obtain during holidays.

Use-it-or-lose-it policies

A use-it-or-lose-it Paid time off usually works well,
but there are some unintended
consequences that manifest
themselves as riskspolicy is one in which an employee's PTO is allocated on a per-fiscal-year basis. At the end of a given fiscal year, any part of that allocation that's unused vanishes.

For the employer, these policies limit financial liability for PTO and simplify accounting. But the effect on employees is to encourage use of PTO near the end of the fiscal period. This happens because some employees (wisely) conserve their allocations through the year to cover themselves in case they or loved ones fall ill, or some other unforeseen situation arises. Near the end of the fiscal period, the need to cover these events decreases, because there are fewer days left in the fiscal year. Employees then take time off to avoid "losing" their allocation. Thus, at the end of the fiscal year organizations can experience increases in staff absences, which can interrupt services. And this happens only because of the use-it-or-lose-it policy.

There isn't much an individual department head or team lead can do to mitigate use-it-or-lose-it risk, beyond calling it to the attention of policymakers and meanwhile planning for interruptions near year-end.

Rollover caps

At the organizational scale, one method of mitigating use-it-or-lose-it risk is to permit rollover of unused paid time off to the next fiscal year. To recover some of the employer benefit of use-it-or-lose-it policies, these rollovers are usually capped. Allowing people to use a limited amount of time in the next fiscal year limits the urge to use that time in the current fiscal year. And requiring that people use the rollover days first in that next year prevents them accumulating forever, if the days can be rolled over only once.

These schemes sound like they're win-win, because they provide benefits to both the employer and the employee. But from the perspective of those who depend on deliverables from project teams, or services from internal organizations, the effect is merely to spread the spike in year-end staff absences across a wider time window at the end of the fiscal year. Caps thus convert an intolerable problem in the last month of the fiscal year into a barely tolerable problem in the last few months of the fiscal year and the first few months of the next fiscal year. Wise internal customers who would have had to plan to avoid one month of staff shortages in a non-rollover regime must instead plan to avoid a wider time window of shortages in a rollover regime. Is that better? Maybe.

Presenteeism

Absenteeism is what happens when people who are expected to report for work don't actually report. Reasons vary, but unplanned absences are usually associated with illness, injury, or family issues. "Presenteeism" is what happens when someone reports for work when he or she ought not to report for work, due to illness, injury, or family issues [Johns 2009]. People who are subject to PTO policies sometimes do this in order to conserve their PTO for future use — a longer vacation, a future family obligation, an even more serious illness, or whatever.

Presenteeism is a problem for both employer, employees, and employees' families if the person in question has a contagious illness, such as influenza or measles. In these cases, other employees could become infected, and require time off. Presenteeism is a problem for the employer if the person in question performs a critical function, and if his or her condition interferes with the performance of that function. For example, someone who is undergoing a stressful emotional situation might not be the best person to deal with resolution of an intricate software defect in a safety-critical system.

Leaders of teams with members who have exhibited a pattern of presenteeism would do well to remind their teams of the risks associated with such choices.

Managing PTO risk is a way of maintaining smooth operations despite unintended consequences of PTO policy. But it's also necessary for making these new policies work. Finding ways to accommodate our colleagues in their use of their PTO helps them accommodate us when we use our own PTO.  Top    Next Issue

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