A Full Guide to Consolidated Leave Plans
There’s a lot to consider when setting up your company’s PTO policy – how much PTO to offer your employees? Accrual or lump-sum? Unlimited PTO?
There’s also the question of how to structure your leave policy. You could break your PTO allowance down into different categories, or go with the simpler approach of a consolidated leave plan.
According to the US Bureau of Labor Statistics, 45% of US workers with access to paid leave are on consolidated leave plans. But is this the best approach for your business?
Keep reading and we’ll explain all you need to know about consolidated leave plans.
What Is a Consolidated Leave Plan?
A consolidated leave plan is when there’s no distinction made between different leave types, and employees get their whole leave entitlement provided in a single bank, to use as they wish.
They could use all their days for vacation, or for sick leave. It’s up to them to decide, and the business doesn’t track and limit how much time off an employee can use for each leave type separately.
Example of a Non-Consolidated Leave Plan
Non-consolidated leave plans are slightly more common (in the US, at least).
With this approach, leave is broken down into different categories, with separate limits (and sometimes different rules and guidelines) for each.
As an example, a non-consolidated leave policy might look like this:
- 15 days allowed for vacation
- 10 days sick leave
- 3 personal days
Vacation days might accrue over the course of the year, and roll over from one year to the next, while sick days and personal days are all available at once, and the balance resets at the end of the year.
Example of a Consolidated Leave Plan
A consolidated leave plan might offer the same overall benefits, but without differentiating by category.
For example, the same business as above might simply offer 28 days off per year.
It might accrue over the year, or become available all at the start of the year.
One employee might end up taking 20 days for sick leave, 2 personal days, and only 6 vacation days.
Another might take 25 vacation days, 3 sick days and no personal days.
Their benefits would come out to be the same amount, as all PTO works the same, no matter the reason for taking it.
Benefits of Consolidated Leave Plans
There are some positives to running a consolidated leave plan in your business, as well as some downsides to consider.
Let’s take a look at the benefits first.
Simpler Admin
Consolidated leave plans can be easier to manage. There’s no need to track different leave types, or create separate policies for each leave type, or judge what’s allowed to be used as a sick day, or a personal day, or other types of leave.
Increased Autonomy for Employees
Consolidated leave plans give more freedom and autonomy to employees.
They’re able to use their leave allowance as they wish. If they want to use all their time off to take regular vacations, they can – or they can be more liberal about taking sick days and personal days, if they don’t care as much about taking long vacations.
Encourages Honest Usage
Employees don’t have to lie or “fake” being sick to take time off.
Since there’s no distinction between sick leave and other PTO, “pulling a sickie” isn’t a thing. Increasing honesty and reducing deception may contribute to a better working environment, and a culture of trust in the workplace.
Talent Acquisition & Retention
A consolidated leave plan may work out to be a better incentive for hiring and retention of talent, due to the increased freedom offered to employees, and because it shows up as a bigger number (“28 days of PTO” looks better on a job ad or contract offer).
Encourages Employees to Maintain Better Health
Consolidating all leave into one PTO bank provides a clear incentive for employees to look after their health.
Workers know they’ll have more time off to use for leisure if they need to spend less of it on sick leave.
This may result in them living a healthier lifestyle, which is likely to benefit their performance at work and contribute positively to company culture.
Downsides of Consolidated Leave Plans
There are downsides to consider with consolidated leave plans, which we’ll examine now.
Reduced Sick Leave Usage
Employees may be less willing to use PTO for illness, fearing they’ll have fewer days for vacation or other personal needs.
This can lead to presenteeism (working while sick), which affects overall productivity and health, and can have negative long-term consequences for the employee.
Potential for Burnout
Some team members may conserve their PTO and avoid taking breaks because they want to save days for emergencies or vacations.
This can lead to increased stress and burnout.
Increased Costs for Employers
In many jurisdictions, any unused PTO is required to be paid out at the end of employment.
This often applies to vacation time, but not sick leave and personal days. However, if all PTO is lumped together into one bank, it’s likely that it all comes under the umbrella of vacation time as the law is concerned.
Additionally, “use it or lose it” laws are more likely to apply. All of this may lead to higher costs for the employer.
Unfairness and Inequity
Consolidated leave plans may feel unfair to some employees, particularly those who get sick more often.
These employees will need to take a higher percentage of their leave allocation for sick leave, and might feel disadvantaged compared to colleagues who can allocate all their time for leisure.
Implementing a Consolidated Leave Plan? Follow These Best Practices
Consolidated leave plans can work if managed well. Effective management is crucial, though, or it can have a negative impact on your employees, and your business.
Here are some best practices to follow for companies considering this approach.
Clearly Communicate Your Policy
Ensure you provide clear and detailed guidelines for employees on how your consolidated PTO bank works, rules for accrual, carryover and payouts for unused time, and any other important details.
Set Reasonable Allotments
Many companies use consolidated leave plans to offer less overall PTO, without giving the appearance as such.
Doing so is short-sighted, and potentially detrimental to company culture and employee wellness.
Ensure your PTO allocation aligns with industry standards, along with any applicable laws, and provides sufficient time for both rest and emergencies.
Actively Encourage Use of Leave
Encourage employees to take time off without fear of judgment or falling behind on work.
Many will feel apprehensive about taking time off, sometimes feeling they need to save up their time off, which can lead them to be overworked and burned out.
Monitor Usage Patterns
Keep track of how employees use their PTO to identify potential issues, such as underutilization of leave, which is quite common as you remove guidelines around PTO.
If you find this is the case, give friendly reminders or encouragement to these team members to take PTO more often.
Consider Providing Supplemental Sick Leave
Some companies supplement PTO banks with a separate policy for extended illnesses or emergencies to address the drawbacks of a unified bank.
This may be a good idea if you want to extend some degree of flexibility for employees, but ensure that team members don’t fully neglect sick leave.
Is a Consolidated Leave Plan Right for Your Business?
A consolidated leave plan, or PTO bank, can simplify PTO management, empower employees, and create a flexible work environment.
However, there are some downsides and risks to consider.
In the wrong environment, or with ineffective management, the lack of clear guidelines can make employees afraid to take time off, or create resentment and feelings of unfairness in your team.
Consolidated PTO requires a thoughtful approach to ensure fairness, encourage healthy leave-taking behaviors, and mitigate risks like presenteeism or burnout.
Balancing flexibility with sufficient support mechanisms is key to making this approach effective for both employees and employers.
