Senior Manager, US Health & Welfare Benefits CH2M Unlimited PTO Financial, Emotional and Practical Considerations for Implementation Laura Earley, CEBS Senior Manager, US Health & Welfare Benefits CH2M

AGENDA Why Unlimited PTO? Why NOT? Eligibility Payroll Considerations Coordination with STD, LTD and FMLA Managing High Performers and Slackers Implementation Considerations Lessons Learned from Implementation

67% of Americans Work on Vacation RAISE YOUR HAND if… You Sleep With Your Device On Your Nightstand? Your Device Is In Your Bedroom at Night? You Look at your Device before you get out of Bed? You Checks Email In the Evening? On the Weekends? While on Vacation? According to a 2013 study by Expedia, 60% of Americans feel Vacation Deprived 67% of Americans Work on Vacation https://viewfinder.expedia.com/features/2013-vacation-deprivation-study

WHY UNLIMITED PTO? THE EMPLOYER ADVANTAGE No Financial Accrual for the value of PTO time Employer of Choice Treat People Like Adults Reward High Performers Have You Calculated the Value of your Accrued PTO Time? Ask Your Accounting Team the Value of PTO in your organization.

WHY UNLIMITED PTO? THE EMPLOYEE ADVANTAGE Treated Like Adults Work / Life Balance Company Perceived as Forward-Thinking Employer If a majority of your employees work during their personal time, shouldn’t they also be able to do personal things during work time?

WHY NOT UNLIMITED PTO?

If you go unlimited… Eligibility Payroll Transition Coordination with Leave and Disability Programs Employee Communication and Perceptions Help Managers MANAGE

WHO IS ELIGIBLE? Hourly vs. Salaried? Blue Collar vs. White Collar? Executives vs. Non-Executives? Pay Grades? Evaluate Your Workforce – What Group is Better Able to Manage Their Workload and Time Off with Minimal Guidance? Who is more responsible? YOU DECIDE!!

PAYROLL CONSIDERATIONS Special Local/State Sick Time Programs (Seattle / SF, etc.) Unlimited PTO Does Not Exempt You from Compliance with Mandated Sick Time Provisions! System Programming Issues PTO Are Considered Hours Worked under ACA Do You Have Federal Contracts? Do Those Contracts Require PTO or Vacation Tracking? Once Vacation/PTO Time is earned, it can’t be taken away

TRANSITION CONSIDERATIONS Do you have Separate Sick and Vacation Banks? Do you have a combined PTO Program? Do you have a Short-Term Disability Program? Do you have High Vacation/PTO Accruals that Need to be Paid? How Will You Pay Out Existing PTO Accruals? Cash Out? Run Out?

COORDINATION WITH STD / LTD Do you have a Short-Term Disability Policy? YOU DO NOW! Develop a Specific Short-Term Disability Benefit Policy and Document Coordination of PTO with STD/LTD Paid vs. Unpaid FMLA Considerations Consider Multiple Periods of Disability – May Exhaust STD but Not Yet Qualify for LTD. Consider Disabilities at Less Than 1 Year of Service Implement 1 Year Wait for Unlimited PTO Time? Grant Pay Without FMLA Protection? How Much Time?

COORDINATION WITH STD / LTD SHORT-TERM DISABILITY POLICY EXAMPLE LENGTH OF SERVICE AMOUNT PAID AT 100% (Over rolling 24-month period) AMOUNT PAID AT 60% (PTO cannot be used to top-up to 100% pay) LTD WAITING PERIOD Up To and Through 12 Years of Service 12 Weeks 14 Weeks 26 Weeks 13 Years 13 Weeks 14 Years 15 Years 15 Weeks 11 Weeks 16 Years 16 Weeks 10 Weeks

Std example #1 DON’T FORGET the OTHER PARENT!! Standard Pregnancy with FMLA – Employee Takes 12 Weeks Off 6 Weeks Post-Partum Disability Paid at 100% - Paid via STD or Unlimited PTO?? 6 Weeks “Baby Bonding” – Unpaid Under FMLA but Employee is NOT Disabled. Required to Give the Time Off, but Not Pay. Pay Remaining 6 weeks at 100%? Pay 3 weeks at 100% and 3 weeks at 0 pay? Pay Remaining 6 weeks at 0 pay? RECOMMENDATION: Develop a Standard Policy for Post- Partum “Baby Bonding” Care to ensure All Employees are Treated Fairly DON’T FORGET the OTHER PARENT!!

Std example #2 Knee Surgery With Less Thank 1 Year of Service – Employee Needs 8 Weeks Off Not Job Protected Under FMLA Technically Has Unlimited PTO Time Unlimited PTO Can Be Abused if no Short-Term Disability Program Is In Place RECOMMEND: Implement Specific STD Program for Employees Specific Benefit for <1 Year of Service Better Benefit with Longer Service? Pay Half of Physician’s Recommended Time Off?

LTD example Employee With >1 Year Has Stroke and is Permanently Disabled Job / Pay Protected under FMLA Technically Has Unlimited Time How Much Time is Paid Before LTD Begins? RECOMMEND: Implement Specific STD Program for Employees Separate from PTO Program Certain Benefit at 100% of Pay Certain Benefit at 60% of Pay Move to LTD

FMLA example Employee With Less Than 1 Year of Service Has a Child with a Medical Condition and Needs time Off Not Protected Under FMLA Technically Has Unlimited Time & Not a Short-Term Disability Manager Must MANAGE and determine what amount of paid time to provide to employee Flexible Schedule? Working Off Hours?

Emotional impact

MANAGING HIGH PERFORMERS VS. SLACKERS Equity Challenges Managers must MANAGE FMLA Time Off vs. A Lot of Vacation Family Issues vs. Vacation Issues

Implementation issues Communication Concerns Bank of Time Off Goes Away (Still Available Until Exhausted) Perceived Loss: “Losing” A Safety Net of Pay In The Event of Layoff or Termination If a Segregated Benefit…How Will Other Groups Feel – The “Haves” and the “Have Nots” Payroll Capabilities for Freezing Balances Tracking State-Required Sick Time Separately (if applicable)

Lessons learned - employee Great Hiring Tool – Attractive to Candidates Employer Viewed as Forward-Thinking Some People Use Less Time Than They Had Before Potential For Abuse Claims of Unfairness Remind The “Have Nots” That They Work 40 Hours While the “Haves” Likely Work Way More than 40 AND Work While on Vacation

Lessons learned - EMPLOYER Significant Financial Savings Ease of Administration from Payroll Perspective A Challenge to Change This Process What You Think is Positive Can Be Viewed as a Negative Potential For Abuse Coach Managers to Manage

HELP MANAGERS MANAGE Ensure Policy is Written – PTO and STD Provide Managers with Guidelines Allow Unlimited Time Up To Limits for Non-Plan Participants Guide/Coach After Those Limits Exhausted Provide Recommended Maternity Coverage for Non-Paid Baby Bonding Time so All Leaves are Consistent

QUESTIONS