Goldman Sachs, the Wall Street investment bank and finishing school for both top officials in the Trump Administration and Democratic governors of New Jersey, recently announced that henceforth its senior bankers will receive unlimited PTO (paid time off). Veetahl Eilat-Raichel, CEO of Sorbet, a platform for companies to convert the value of an employee’s vacation time into a debit card for the employee, is skeptical that Goldman has embraced work-life balance.
Cumulatively, only 72% of earned PTO days are used by US employees, which leaves $272 billion in annual accrued liabilities on the balance sheets of American companies. That averages out to $3,000 worth of unpaid PTO per employee every year. Sorbet works with companies to put the value of untaken PTO on debit cards, allowing employees to literally “spend” their time off while allowing employers to avoid an accruing liability.
Since Americans aren’t taking all of the vacation they already have, Veetahl sees unlimited PTO as an empty, even cynical, gesture. We asked her what the real deal is with PTO, what to make of a potential employer offering unlimited PTO, and how its a problem for employers that so many people don’t use their vacation time.
Grit Daily: I’ve never left a paid day off unused in my entire life, but research tells us that Americans in general are notoriously reluctant to take PTO. That sounds like all upside for the employer, so why do we hear so much about companies worried their people are not taking vacations?
Veetahl Eilat-Raichel: That’s a great question. First, let me just say that it’s so refreshing to hear that you’re making the most of your vacation days! While you and I can’t imagine a world in which our PTO goes unused, unfortunately, we are the minority.
In the US, employees only use an average of 72% of their allocated PTO. When it comes to unused PTO, employers are negatively impacted in two different ways. First, from an HR perspective, there is a vested interest that employees take time off. All research shows that when people take time off they return to work feeling more productive and less likely to burn out.
On the other hand, there are also more direct financial implications when it comes to unused PTO. When employees don’t use all of their paid time off, the value of their unused time gets locked away and turns into an expensive, unpredictable liability for employers, ballooning annually at the rate of wage inflation. Employees can only access the money when they ultimately leave the company and employers are faced with unexpected payouts at higher costs.
Unused PTO liabilities essentially translate into a hefty debt on companies’ balance sheets that they can’t plan for and don’t know when or how much they’ll have to pay back. That’s a lot of question marks, especially when it comes to such a large amount of money and on such a large scale. Overall, it’s what we in the business like to call a lose-lose.
Grit Daily: How big a liability for the employer is unused PTO?
Veetahl Eilat-Raichel: Employers are facing over $272 billion in annual accrued PTO liabilities alone. Think an average of $3,000 per employee!
Grit Daily: Let’s say Sorbet catches on big time, and employees are routinely given a cash card for their unused PTO. Are you at all worried that will further incentivize people to not take vacations?
Veetahl Eilat-Raichel: As much as we would love nothing more than for employees to use up all of their vacation days, we’ve seen time and time again that they just simply don’t use all of their time off. So instead of their days getting locked up until they eventually leave the company, or lose them entirely, we’re giving employees a third option—cashing out the unusable portion.
A huge part of our solution is honing in on the “unusable” part; the portion employees can’t or otherwise wouldn’t be able to use. Of course, if an employee would prefer to use all of their vacation days (like yourself), they absolutely should and are encouraged to! In fact, Sorbet’s cash out option will help make taking an actual vacation possible for those who otherwise couldn’t afford to. Employees will be able to cash out their Unusable PTO™️ and use it to pay for the vacation they’ve always dreamed of.
Additionally, we’re seeing more and more employees, frontline workers in particular, struggling to make ends meet. As it stands, 70-100 million Americans are currently living paycheck-to-paycheck and 40% of US workers can’t even come up with $400 in the event of an emergency. Sorbet can give employees access to their own hard earned cash when they need it the most, leaving their bi-monthly paychecks untouched. Whether an employee decides to take all of their days or cash them out, our main mission at Sorbet is to give them the power to choose. So to answer your question, no, I’m not worried. 🙂
Grit Daily: I read what you had to say in the New York Times article about Goldman Sachs adopting unlimited PTO, but please tell me why you don’t see that as a pure hearted act of benevolent management?
Veetahl Eilat-Raichel: An unlimited vacation policy may seem “generous” at first glance, but if you take a closer look, it is not in the employee’s best interest, from both a financial and wellness perspective. At its core, Unlimited PTO is a bad policy with very good marketing. And I have no doubt that Goldman Sachs’ decision to offer senior bankers unlimited vacation was completely driven by financials. Here’s why:
Employees with unlimited vacation take an average of 13 vacation days a year compared to 15 out of an average of 20 days given to them in companies with regulated PTO, according to our research. This means that Goldman Sachs employees will end up taking less time off and in turn, make less money than they did before. The most interesting part is that the new policy is for senior bankers only. Senior bankers who get paid the most and accrue the most vacation days by far. So by offering their top bankers Unlimited PTO, Goldman Sachs no longer has to worry about paying out large sums of money for their accrued vacation when they leave the company.
Honestly, it’s hard to see it as anything other than what it is—a calculated, cost saving move.
Grit Daily: If you were looking for a job and had offers from two companies, one that offered unlimited PTO and the other offering a fixed number of days per year, all else being equal, which offer would you accept and why?
Veetahl Eilat-Raichel: A company’s PTO policy can tell you a lot about their culture, and for me, Unlimited PTO is immediately a red flag. What it tells me is that the company doesn’t actually care about the wellbeing of its employees. See, “unlimited” is not really unlimited, right? In fact, on average, employees with Unlimited PTO take almost 30% fewer days than employees with an allocation of PTO. So you actually end up working more, and earning less than your peers.
Think about it like this: your employer pays you to work X number of days per year, and also pays you not to work X number of days. Yes, that’s right, you are actually paid not to work. It’s part of your contract. In some countries it’s the law.
So when you don’t take your time off, you’re actually working extra days – unpaid. With that said, I’d choose the job with a fixed number of PTO days every time.
Grit Daily: Are there any other points you would like to make?
Veetahl Eilat-Raichel: Absolutely. I could go on and on about the implications of Unused PTO, but I think for things to truly change and evolve for the better, employers need to understand that PTO is not a ‘one-size-fits-all’ solution and companies need a culture shift, not a Band-Aid.