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					                                                                                                        VOLUME 61 u NUMBER 3




Employee Benefit
Š Plan Review
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FEBRUARY 2007
Š COLUMNS                                   Š FEATURE ARTICLES
FROM     THE    EDITOR                            Feature
     Steven A. Meyerowitz                         The Effect of an Avian Flu Outbreak on Workers’ Compensation
ASK    THE    EXPERT                              Insurance Plans
                                                     Diana Shafter Gliedman
FROM     THE    COURTS
     Norman L. Tolle                              Focus on . . . Perspectives
     Pharmacy Benefits
     Edmund J. Pezalla                            Talking About My Generation: The Challenges and Changes
TECHNOLOGY                                        of a Maturing Workforce
     Curt Finch                                       Alden Skar
INDUSTRY UPDATE                                   Dubious Rationale for a New Compensation Policy
     News                                           Frank Giancola
     Transitions
     Publications, Etc.                           The Dynamic Change in Workforce Motivation: How Did We
     Calendar
                                                  Get Here?
                                                     Stephen Theiss

                                                  The Case for Outsourcing Benefit Communications
                                                        William E. Griffin
                                                                                                                                                                                                               Š Technology
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                     What to Consider When Instituting a Vacation
                     Policy
                     Curt Finch




                     M
                                    any companies ignore paid time                                                       The Law and the Agreement—
                                    off (PTO). They are casual about                                                     How to Make It Work
                                    vacation and sick days, but as                                                          The first question businesses need to answer
                                    they grow, they must be aware                                                        when creating their PTO plans is what to do
                     that PTO can become a significant expense                                                            about employees who quit or are terminated.
                     that must be managed. Here are some things to                                                       Many states require that the balance of vacation
                     think about when developing or improving a                                                          days be paid when an employee leaves the firm,
                     PTO plan.                                                                                           unless the company has a policy that states
                                                                                                                         otherwise. In some states the default policy is
                     Talent—How to Get It                                                                                much more employer friendly. Texas is an
                         There plenty of people who are willing to                                                       example of a state that defaults to this policy.
                     work 60 hours per week to become a top wage
                     earner. A recent study by the Harvard Business                                                      Cost/Benefit and Ethics
                     Review found that 52 percent of top wage                                                               If a company chooses to disallow vacation
                     earners work more than 70 hours per week. Are                                                       time to resigning employees and it runs a com-
                     they going to snap?                                                                                 pany of high turnover—a fact of life in certain
                         In a war for talent plagued by job hopping,                                                     industries, such as retail or food service—this
                     employers are being forced into providing                                                           allows the company to reallocate the PTO that
                     vacation plans based not on seniority in the                                                        those who leave might have used in favor of those
                     company, but instead on seniority in the                                                            that stick around. In essence, the company can
                     industry. If a company wants to attract high                                                        offer more generous PTO packages when
                     calibre people from other firms, it may increas-                                                     recruiting than its more lenient competitors can
                     ingly have to match the vacation plans they had                                                     offer—at no additional cost. And this is arguably
                     at those firms. But how can it keep that under                                                       more ethical. After all, employees deserve bene-
                     control?                                                                                            fits commensurate with their loyalty, do they
                         Controlling and understanding PTO allows                                                        not? Given that the company has earned their
                     companies to recruit better talent. They can                                                        loyalty, how should it accumulate PTO?
                     promise and allow people more vacation than
                     competitors if they know that it is controllable.                                                   How to Accumulate
                     This tips the balance, allowing a company to                                                           Companies have many different formulas for
                     build a better team than its competitors. It is                                                     the accumulation of PTO, based on hours
                     another way to win. If a company does not want                                                      worked, seniority, title, and geographic location.
                     its great teams to burn out, it can use vacation to                                                 Different firms institute different policies to
                     keep hard-won, talented employees longer than                                                       reclaim unused PTO at the end of various time
                     its competitors.                                                                                    periods (usually the fiscal year, the calendar year,
                                                                                                                         or on the anniversary of the employee’s hiring).
                     Burnout or Slacker?                                                                                 Plans that allow unused PTO balances to roll
                        A company’s profitability can be wrecked in                                                       over year after year can build up a larger liability,
                     two ways: by overwork with its associated                                                           as when the employee takes the vacation long
                     burnout, or by too much absenteeism. Every-                                                         after earning it; after several pay changes, it will
                     body needs a vacation once in a while—                                                              be taken at a higher pay rate than earned. This is
                     ‘‘workaholism’’ is unsustainable long term.                                                         an important financial consideration.
                     Sometimes companies must encourage people to
                     ‘‘vacate.’’ On the other hand, a few employees                                                      PTO Is Changing
                     with serious absenteeism problems can wreck the                                                        Generalized PTO plans are simpler to under-
                     morale of good employees. But the law is a                                                          stand and administer than plans that separate
                     company’s friend.                                                                                   sick, vacation, and personal days. They also


                     Employee Benefit Plan Review                                                                                                                                                                  February 2007                        27
Š Technology
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favor healthy employees. Employees                                              their fair share of PTO. Letting an                                                 According to a recent Expedia.com
with absenteeism problems often get a                                           automated system control this makes                                             study on U.S. vacation habits, in
better benefit under traditional plans                                           the job emotionally easier—the                                                  2002, a typical American was
with dedicated sick days.                                                       employer needn’t play the heavy all                                             granted 16 vacation days, but only
   Healthy workers prefer PTO plans                                             the time.                                                                       took 14 days off, handing back
because they can take some of the days                                             Second, it can allow a company to                                            more than $21 billion in unused
that were formerly classified as sick                                            have a better understanding of who is                                           vacation days to employers. In Eur-
days as vacation instead. And then                                              not taking time off. Employers prob-                                            ope, by contrast, the average is
there’s the ‘‘honesty dividend.’’ People                                        ably already know who needs time off.                                           30 days. So employers should
needn’t call in ‘‘sick’’ when they are                                          Who’s the grumpiest sourpuss in the                                             be generous when they hire.
really going shopping. HR doesn’t                                               office right now? How much of their                                              Employees probably will not use
have to play policeman on employees’                                            vacation have they used? Send them                                              it all anyway.
reasons for taking time off, or demand                                          on a vacation. Keeping workaholics in
a doctor’s written excuse for absences.                                         the office represents a false economy                                            Conclusion
   On the other hand, as a company                                              in most cases.                                                                     Controlling PTO appropriately
exceeds 50 employees and falls under                                                                                                                            leads to a smoother operating work-
the Family and Medical Leave Act                                                Don’t Be Stingy                                                                 force. It curtails the malingerers and
(FMLA), it may want to split FMLA                                                  There is evidence that the
                                                                                                                                                                shines a spotlight on the unsustainable
accruals from other PTO in order to                                             European habit of taking six weeks
                                                                                                                                                                workaholics. Picking the right legal
ease the task of meeting federal                                                of vacation every year leads to higher
                                                                                                                                                                structure for PTO plans is a card
reporting requirements. This is where                                           productivity. They work just as
                                                                                                                                                                employers have to play in some states.
automation becomes very important.                                              hard as Americans, but they know
                                                                                                                                                                An automated PTO tracking system
                                                                                that they’re going to get that one                                              makes the PTO management job so
Automate. Automate.                                                             month or more where they can really
                                                                                                                                                                much easier. b
Automate.                                                                       recharge. Guess what? Things don’t
   Many companies—especially small                                              come to a halt.
                                                                                                                                                               ........................................................................
ones with highly skilled workers—                                                  The statistics back this up. Con-
have a casual attitude towards PTO.                                             trary to myth, Europe has often out-                                                  Curt Finch is the CEO of Journyx, a
But as a company grows to exceed 50                                             paced the United States in                                                      provider of Web-based software located in
workers or so, having an automated                                              productivity. In fact, Europe had a                                                    Austin, TX, that automates billing,
system to help manage this benefit can                                          higher productivity growth rate in 14                                                   payroll, and project accounting by
be beneficial in two ways.                                                      of the 19 years between 1981 and                                                 tracking time, expenses, and mileage. He
   First, it can help curtail the intent of                                     2000, according to the U.S. Federal                                                                      can be reached at
employees who would take more than                                              Reserve Board.                                                                                         curt@journyx.com.




28        February 2007                                                                                                                                                Employee Benefit Plan Review

				
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