Several economic and social changes post pandemic are driving employers to consider updating paid time away and leave programs. Programmatic changes are focused on four core factors that are common across employers:
The COVID-19 pandemic’s impact on the ways we work and the social and political unrest during the pandemic, all served as accelerants to change. Here are observations of how the time off and paid leave landscape has shifted, as well as topics that are top-of-mind for employers given the current economic, technical, and social environment.
01
In the current competitive labor market, all benefits matter. Our Global Benefits Attitudes Survey found that, from an attraction standpoint, the U.S. workforce ranks time off and leave benefits in the top six of all benefits (immediately after retirement benefits). Younger generations especially value these benefits more than prior generations. For example, Gen Z (workers under 26 years old) ranks these programs in the top four. Gen Z is expected to make up 27% of the U.S. workforce by 2025.
To further improve the attractiveness of leave plans, employers are adding less conventional programs such as sabbaticals. According to our research, only 15% of employers offer a sabbatical program today, but another 12% of employers are considering such a program for the future. If you neglect to revisit your time off benefits, then you will be at a disadvantage in this competitive labor market.
02
Time off not only impacts employers financially from a workforce availability standpoint, but also from a profit and loss accounting standpoint. Where employees accrue PTO or vacation that rolls into a subsequent year, there is often a financial liability that is created to account for future payment.
Take for example an organization with 10,000 employees, where the average PTO rollover is 10 days. The annual financial liability could be close to $30 million. This figure would grow annually by approximately $1 million per year assuming very conservative cost of living increases. This liability is significant and has ballooned during the pandemic, with many employees reporting less time away than in prior years. Now, with the increased prevalence of “work from anywhere,” employers are rethinking their approach to traditional paid-time-off programs.
Some employers have adopted unlimited time off programs. If these programs are structured correctly, they can provide adequate time off and improved flexibility, while at the same time mitigating the balance sheet liability associated with unused PTO and vacation days. According to our Best Practices in Healthcare survey, these types of programs are on the rise: While only 8% of employers have this type of program for their exempt employees, 24% of employers have this type of program in place for their director level employees (with another 11% considering this type of benefit for directors in the future).
03
Our survey found employers who have a strong commitment to DEI also tend to have:
Workers’ awareness of DEI programs increased during the recent social and political unrest in the U.S. In turn, employers are mindful of DEI when making changes to their time off programs, by providing socially significant paid days away from the office.
We also found more employers providing floating holidays to allow employees to identify their own religious and socially important holidays.
Similarly, employers are expanding their paid family, caregiving, parental and bereavement programs to be more inclusive and equitable (e.g., eligible family members/loved ones, types of leave), easier to access and providing more days/hours of paid time away from the office.
04
While the U.S. is one of a few nations without federally mandated paid leave programs, there is a patchwork of state-mandated paid family and disability leaves in addition to over 40 paid sick leave laws across various cities, states, and municipalities.
According to a WTW survey, 78% of employers report that managing the differences in leave rules is a burden.
As new leave laws are implemented, employers struggle to:
Employers are on the lookout for a “future proof” program, which can be difficult as each statutory program is unique in design – whether it be funding source, administrative options or the benefit offering itself.
Recognizing the compliance and administrative challenges that individual state and local leave laws present employers, the Workflex in the 21st Century (H.R. 4219) Bill would have exempt employers from state and local leave law obligations if the employer provides workers with a specified amount of general paid leave. Unfortunately, the bill that was introduced on November 2, 2017, did not receive a vote, so employers are left to design programs that comply with the patchwork of legislative leave laws.
Given the importance of time away benefits in talent management, the financial considerations and compliance issues, now is a good time to reassess and redesign your time off programs. Expert guidance can assist in implementing competitive, compliant, and cost-effective leave programs. In this evolving landscape, staying proactive ensures that you can meet the needs of your workforce while navigating the changing terrain of paid time off and leave policies.
