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Producer Connection is Standard Insurance Company's bi-monthly online newsletter for Employee Benefits producers.
Let us know what you think of Producer Connection and how we can make it better.
As organizations take a closer look at how well their benefit offerings fit the needs of the organization and its employees, traditional sick and vacation leave banks are under scrutiny. Public groups, in particular, have historically provided very rich sick leave plans. In an effort to help reduce overall costs, many are weighing the pros and cons of transitioning to "paid time off" (PTO) with Short Term Disability (STD).
How PTO and STD work together
Traditional time-off plans usually consist of both sick and vacation leave banks, along with any personal days or floating holidays offered by the organization. A PTO plan consolidates these forms of paid leave to a single bank. Employees accrue a certain number of hours or days to use for time off. STD is implemented with PTO programs in order to provide absence management for days off related to accidents or sicknesses.
What are some advantages?
Simple and flexible
PTO plans are easier to track and administer because there are fewer time-off categories. Since employees won't be tempted to fake illness to use a sick day for another reason, there are fewer abuse issues to deal with. Introducing STD provides a uniform benefit schedule to eligible employees for accidents and sickness and can be designed to provide different benefits to different classes of employees.
Savings through absence management
In a traditional plan, sick leave is not paid out when an employee leaves, unlike accrued vacation time. This can lead to abuse if employees feel entitled to take sick time when they're not sick. A PTO plan, in combination with STD, effectively manages the total number of paid absences related to accidents and sicknesses, as opposed to plans where employees are not required to qualify for sick days, particularly if they are allowed a large carryover.
Increased employee satisfaction, easier recruiting
With employees looking for more flexibility, paid-time-off plans can be a great tool for both recruiting and employee retention. PTO plans can be seen as inherently more fair since everyone gets the same number of days off.
What are some disadvantages?
For some employees, it's a take-away
A PTO program usually allows employees to accrue fewer days than traditional plans. An organization where employees had 10 vacation days, 10 sick days and five personal days might have a new PTO plan with only 20 days. That "plus" for the employer might be seen as a major drawback for employees.
Sick workers don't always stay home
Sick employees should stay home, but some workers may be reluctant to use their PTO for anything other than vacation. The result could be increased absenteeism when they spread their illness to their fellow employees. An STD plan can help prevent this by preserving vacation time while managing the disability.
Potentially larger payouts when employees leave
In most states, PTO is treated like vacation time and paid out when an employee leaves. For some organizations this may reduce financial exposure, depending on the caps imposed on carryover time. For others without STD, it may have a negative financial impact versus separately carried sick days, which are not payable when employees leave the company.
If you have a client considering making the switch to a PTO with STD plan, contact your Sales Rep to discuss how The Standard can help.
Questions to ask before implementing PTO with STD
Moving to a PTO with STD plan isn't right for every organization. To help avoid potential problems, there are several key areas an organization should consider before making the move: