For decades, vacation and paid time off (PTO) policies for most U.S. companies have been calcified into an immutable system, with only a few deviations. Basically, a certain number of accrued hours off are separated into vacation days, sick days, and personal leave days (although in 1993, a new kind of leave—family leave—was signed into law by President Bill Clinton).
The system requires a lot of oversight from managers, and in some states, companies have to pay employees for unused time when an employee quits or is laid off.
Over the past few years, forward-thinking HR pros and others—led mainly by companies in the tech and creative industries—have begun shaking up the system by introducing new ways of providing the benefit. Armed with studies showing that employees aren’t using their PTO, companies are rolling out benefits like unlimited PTO and summer Fridays. Unlimited PTO allows employees to take as much leave as needed as long as they work with their team to make sure their duties are covered. Implementing summer Fridays means closing the office on Fridays in July and August, which reduces the workweek to four days (and can help employers save money on energy and other costs). Some companies have even taken to paying their employees to take their vacation time.
Another way for companies to maximize the benefits of their employee leave program is to allow employees to donate their unused PTO, vacation, sick, or leave days to a pool that can be used by other employees when they face medical, family, or other types of emergencies.
Letting your employees donate their excess time off to help their coworkers brings benefits to everyone: donors feel good about helping fellow employees in need; recipients get the paid time off they need to weather a storm; and employers reap the benefits of a more bonded workplace.
A recent study by the International Foundation of Employee Benefit Plans showed that 30 percent of employers offering paid vacation allow workers to donate paid vacation days; 28 percent of employers offering PTO plans allow workers to donate paid time off; and 22 percent of employers who provide paid sick leave allow workers to donate sick leave.
As more employers learn about the benefits of leave donation, those numbers will likely continue to rise. A leave donation program can help overall morale and reduce absenteeism, benefiting employee and employer alike. However, it’s crucial to do some research before jumping in.
- Nail down the policy. While the motivation behind a donation program is altruistic, there’s always the chance that an employee or two might feel that it’s being used to play favorites—or it could instigate office gossip or other potential HR pitfalls. As with any new policy, talk with your company’s HR and legal team before moving ahead. You’ll also want to hash out the details of the donation procedure—how much leave can be donated and accepted.
- Consult with a tax expert. The tax laws covering donated leave are fairly straightforward: the employee doing the donating is still taxed on the leave. And even though the paid leave is a donation, it’s generally not considered tax-deductible. However, employing a tax expert to help set up your leave donation program may help altruistic employees avoid these taxes by taking advantage of some IRS exceptions.
- Consult with your employees. Before going through the time and expense of setting up a program like this, make sure your employees are interested. Be frank about the pluses and minuses, including the possible tax liability.
A leave donation policy offers employees a chance to help each other during tough times, while allowing workers a chance to continue earning income when in need. In the best-case scenario, no one would ever have to use it, but as long as you take care in implementing such a program, it can offer a unique way to create a vital workplace safety net.
Jonanna Widner lives in Portland, OR, where she writes about sports, music, travel, and fitness.