What COVID-19 means for employee leave policies

As employers navigate COVID-19-related challenges, they are questioning how employees’ need for time off will be affected by legislation, health and safety issues and talent availability.

With the emotional well-being of employees of utmost concern, many employers are hitting the reset button on leave policies. Specifically, they are objectively reviewing this situation in the context of total rewards strategies in order to make necessary adjustments and investments.

The cost of paid-leave benefits is often an employer’s largest expenditure, even exceeding healthcare. It stands to reason, therefore, that the starting point for employers’ analysis of time-off programmes is to develop an understanding of the total spend for employees who are on leave. Individual organizations’ policies may vary considerably based on factors such as the employer’s demographics, geography and industry.

Companies are urgently addressing leave policies in the wake of COVID-19, but they are also addressing leave and caregiving priorities and programmes, recognizing the change in workforce demographics requires greater recognition of multi-generational needs and means thinking about interim and long-term strategies.

Flexibility is a critical tenet to employee and caregiver wellbeing. COVID-19 has magnified caregiver needs and solutions from the more atypical resources such as employee assistance plans, back-up child and elder care, and discounts and subsidies to broader initiatives, including onsite tutoring, concierge and virtual/digital self-service options as well as special care, child and parental leave and allowances. Providing alternative scheduling and work hours has become a focal point especially for those working remotely.

Paid time off (PTO) is the most emotive of benefits and affects all employees. How these programmes are structured may or may not be intuitive. Typically, we think of vacation or PTO programmes in two ways:

There is no one size fits all to determine which structure best fits an organization’s needs. But it is important to recognize that leave programmes should integrate, and it should be easy for an employee to understand how they fit together.

Organizations generally modify their leave (all time away from work) plans once a decade unless triggered by M&A, new legislation or a change in talent needs, including recognition of a far more diverse workforce. Amid the pandemic and current spotlight on social injustice, many employers are revisiting their designated versus floating holiday schedules to consider observance of Juneteenth or election day. Additionally, some are considering an increase in volunteer days as a call to action to give back to the community.

During the COVID-19 crisis, employers who furlough or lay off employees can allow their employees to take their PTO/vacation/sick leave before they move to unpaid status. However, employees receiving pay are not eligible for unemployment until they are no longer being paid. Depending upon employees’ compensation, they may make different choices about deferring available paid time off or taking it immediately. There can also be ripple effects on other benefits and taxability, especially if employee contributions are not collected for furloughed employees.

According to Willis Towers Watson’s 2020 COVID-19 Benefits Survey, there are several employer responses to leave and vacation, sick leave and PTO policies:

Managing excess time off

Employers need to be mindful that employees may hoard their vacation or PTO or delay scheduling elective procedures, which can result in productivity challenges at year-end. Employers need to factor in the potential impact on the balance sheet to account for carried-over or deferred vacation or PTO.

It is clearly understandable, based on the first half of this year, why employees may opt to defer. However, evaluating actual year-over-year usage near the end of the summer is critical to understanding perception versus reality.

Employers faced with employees building large banks of vacation or PTO have several options such as allowing for additional cash out, carryover or accruals; others are considering donation banks, buy-sell programmes, mandated shutdowns, furloughs and capped accruals or layoffs.

For employees with caregiving responsibilities the challenges are heightened, and some employers are adopting flexible and compassionate policies that allow employees to carry over negative vacation/PTO balances and dip into future accruals.

Many employees are currently frustrated and do not want to have to take what in their minds is “pretend time off” or “staycations” owing to current health concerns, travel restrictions and risks. Employees feel they have earned their vacation or PTO and believe they should choose how and when to use it.

Taking all of this into consideration, the following are some crucial steps for employers to consider:

Since we cannot foresee the future or predict if we will have another spike of COVID-19 cases, it is essential for employers to make well-informed workforce decisions with contingencies, especially when it comes to leave. The clock is ticking; the time to plan is now.