Is Paid Time-Off The New Norm?

PTO is an often over-looked benefit in small business, but to be competitive in the today’s workforce market it is a necessity. PTO refers to any paid time off, such as vacation days, sicks days, or personal days. Although it can be difficult for a business owner to think about paying an employee when they aren’t working, let’s understand how this gets perceived by the employee and break down the real cost to this simple benefit.

Consider a scenario where you have identified a candidate for an open position with your company, but in this highly competitive job-market, they have 2 offers to consider. One offer is with a large company of 500 employees and the other is with your company of 10 employees.

Both companies have offered a base salary of $40,000, but the large company is also offering a small annual bonus or profit share, paid employee health care, a 401k match, 2 weeks vacation and 3 sick days – all pretty standard benefits in Corporate America. Quickly this $40,000 offer has reached well over $50,000 and has afforded the employee some work/life balance.

Your company on the other hand is offering $40,000 – period. You have made the decision for this candidate pretty easy. Even if they want to work for your company, you are communicating to the employee that you really are not concerned with their personal time or a quality work/life balance. People may not worry about the 401k match or the delayed bonus, but they get a little worried when you mess with their family vacation in Florida for Spring Break.

Now let’s look at the real cost. If you offer 2 weeks PTO on a $40,000/year employee, it breaks down to only $1,538. Without the PTO you nearly guarantee lower productivity rates and run an incredibly high risk of turnover due to burnout. Even a 20% drop in productivity over 3 months would cost you $2,000 and research on cost of replacing a $40,000/yr employee would show ranges from $8,000-$30,000. This means even if they stay you are losing more every quarter from lost productivity than you would lose in a year by providing the time off.

When you hire an employee you spend a lot to help them succeed. You purchase computers, software, office furniture, online training, etc. Now are you willing to invest in THEM? Most of the other purchases you made will decrease in value, but when you properly invest in an employee, they almost always increase in value to your business. 

If you need help putting together a PTO plan for your business, let’s talk.