Before beginning my full-time ministry career, I spent over 11 years working as a tech support supervisor and software developer in the IT department for a leading golf manufacturer. I am forever thankful for the fantastic people I worked with who taught me how to lead people and projects and provide exceptional customer service. Not only did the company provide me with tremendous opportunities, but it also offered a generous benefits package that included matching retirement funds for the 401(k) plan, a health package that included medical, dental, and vision, and PTO (paid time off). I was young, eager, and committed to working hard and putting in whatever time was necessary to succeed. Unfortunately, for me, that meant not taking too much time off. So much so that I amassed over 400 PTO hours by the time I left the company. In hindsight, I now see that was really unhealthy for the company and me. I needed to take time off for my well-being. I’m sure that Callaway wanted me to take time off; that’s why they offer PTO as part of the benefits package. And, when I left, it created an unbudgeted payroll expense for them. Since they are a billion-dollar company, I’m going to go out on a limb and say my departure didn’t impact their bottom line too much. But, each year around budget time, I cannot help but think about the unbudgeted liability earned time off creates for small businesses and churches and the strategies to mitigate this cost.
(PTO) Paid Time Off
When I began my career at Callaway, the benefits package included accrued vacation time and one week of sick time per year. However, it became clear to the employees and the employer that as the end of the year was closing in, more and more people that had not used their sick time were suddenly “sick” to avoid losing the benefit. The solution was to transition from vacation and sick time to PTO. PTO typically encompasses vacation, sick time, and personal days for employees to use as they need or desire. As an employer, the advantages of offering PTO far outweigh the disadvantages of not offering this critical benefit.
- Advantage: Indeed cites improved morale and employee retention, improved work-life balance, and reduce unscheduled absences. In today’s competitive marketplace, offering a benefits package that includes a PTO plan that improves morale and retains the high-capacity employees is a huge win your organization cannot afford to ignore.
- Disadvantage: As with any benefit plan, PTO has disadvantages, like employees opting to come to work sick so they can use their PTO for vacation. And the one that haunts me during budget time is the employee leaving with a bunch of unused PTO hours.
A church budget is a plan for the upcoming fiscal year providing the blueprint of how the church will invest its precious financial resources to accomplish its mission. Generally, compensation is one of the largest, if not the largest, components in a church budget at 45%-55% of the entire operating budget, making it critically important to be as accurate as possible when determining compensation costs. Here is a list of the items to include when calculating church budget compensation costs: salaries, housing allowance, benefits, worker’s compensation, taxes, and retirement. Notice that the list does not include accrued PTO balances for employees, creating the potential for an unbudgeted financial liability.
It doesn’t matter if you’re a billion-dollar company, a small business, or a church; you want to attract and retain the best employees as an employer. Offering competitive benefits shows employees they are more than just another cog in the machine. Here are a few thoughts on including PTO as a benefit without carrying an unbudgeted liability beyond what the church can support.
- Offer PTO as a Benefit: As the line between work-life and home-life continues to blur, providing employees with time off helps create a healthier work-life balance, especially relevant in the post-COVID and remote work environment. In addition, PTO improves employee morale, leading to increased employee retention.
- Create a Culture that Encourages the Use of PTO: As a young, eager, career-minded employee, I wanted to establish myself as someone who can produce results, and in my mind, that meant not taking too much time off. Instead, I just kept pushing and working. I don’t blame my former employer for this, but an organization needs to do more than just offer time off – it should create a culture that encourages and models the use of PTO. The employee will reap the benefit of refreshing, and the employer will have more productive, creative, and motivated employees. On top of that, employees who use their time off have lower PTO balances, reducing the unbudgeted liability when they leave the organization.
- Create an Accrual Cap for PTO: Most small businesses and churches could not absorb a salaried employee suddenly needing 400 hours (that’s ten weeks or two and a half months) pay. Just thinking about that makes my heart race a little. In addition to creating a culture that encourages the employees to use their PTO, I recommend creating a cap on the amount of PTO hours employees can accrue. For example, if the policy states a full-time, exempt employee that has been with the organization for 3-5 years earns 120 hours (3 weeks) of PTO per year, set the cap at 1.5 times the award or 240 hours. When the employee reaches the accrual cap, they cannot earn additional PTO hours until they use the earned PTO. Important: When creating the accrual cap, check both Federal and State guidance to ensure the policy is compliant. Remember, this is a benefit to the employee; the accrual cap is a way to limit the unbudgeted liability and encourage employees to use their PTO; it’s not a punishment.
- Be Generous to the Employees: When determining what benefits to offer to the employees, be generous. For a church, being generous to the employees is of particular importance. The Bible repeatedly tells its readers that a laborer is worthy of his wages (Leviticus 19:13, Luke 10:7, and 1 Timothy 5:18). Churches need to pay the employees what they are worth. The Apostle Paul ups the ante in 1 Timothy 5:17 when he wrote, “The elders who direct the affairs of the church well are worthy of double honor, especially those whose work is preaching and teaching.” Be generous when it comes time to determine the PTO accrual structure policy. Church work is hard, and years of faithful service should be honored and rewarded. Be generous when defining the accrual cap. As an employer, the accrual cap is to help limit the unbudgeted liability, not reduce the benefit. Finally, when the time comes, and a faithful employee moves on, be generous when calculating their final pay. When I left Callaway to start my career in ministry, there was never a feeling or suspicion that they were trying to deny or withhold anything due to me. As representatives of Jesus, we should do no less.
As with other organizations, churches need to make every effort to accurately budget for each upcoming fiscal year, taking special care regarding compensation. But acknowledge that the budget will not include the expense of unused PTO when an employee terminates from the church. To mitigate this potential liability, a church should create a culture where everyone is encouraged to take time off to rest, reset, and recharge – creating a healthy work-life balance. Additionally, churches need to develop policies that set an accrual cap to limit the total amount of PTO allowed and reduce the unbudgeted payroll liability. It’s a great way to show stewardship and generosity.