ARTICLE | The Employers’ Guide To Consolidated, Non-Consolidated & Unlimited Leave Policies
Leave practices and policies can be wildly inconsistent between states, industries, and organizations - even internally - and yet they are regularly one of the top factors employees consider when evaluating and taking stock of their prospective and/or current compensation packages and job situations, generally.
Further, according to Forbes’ best employee benefits of 2024 reporting, leave is one of the most notably undervalued benefit package components in terms of the gap between the importance ascribed to favorable leave policies by employees vs. the importance ascribed to favorable leave policies by employers.
The combination of the wide-ranging leave policies employees may have encountered over the course of their careers and the large number of employers that are overlooking the significance of leave from the employee perspective provides an opportunity for employers to better align leave policy with larger organizational goals while gaining a competitive edge over other players in their respective industries at the same time.
Paid Leave In the USA
Despite that the idea for paid leave first started gaining steam globally around 1910 after President Taft proposed a law (that never came to pass) requiring 2 to 3 months of mandatory paid vacation for every American worker, the US has lagged behind its international, industrialized peers ever since in terms of ensuring its domestic workforce has access to paid time off from their labor.
In the years since, many state governments have stepped in to require private employers to provide some forms of paid leave in some situations, and many private employers have of course gone above and beyond state minimums as part of a compensation package designed to attract, retain, and optimize the output of talent, but the end result is a mess of policies and expectations that can vary considerably depending on a number of different variables.
The net effect of those varying policies is that a little less than 8 out of 10 workers on average in the US have access to some form of paid leave, with about 79% of US workers having access to paid sick leave, 77% of US workers having access to paid holidays, and 75% of US workers getting some form of paid vacation.
Non-Consolidated Leave vs. Consolidated Leave vs. Unlimited Leave
Even among similarly situated employers, there remains at least 3 distinct approaches for how best to navigate this shifting leave policy landscape - the standard non-consolidated leave approach, the growing consolidated leave approach, and the emerging unlimited leave approach.
There are, however, disadvantages and advantages to each of the potential leave approaches that comparably positioned organizations may weigh very differently and are best addressed on a case-by-case basis in light of the circumstances specific to a given employer.
Non-Consolidated Leave
Non-consolidated leave policies separate different potential types of leave into categories with a separate amount/tranche of leave time offered for each category. For example, in non-consolidated leave plans an employee is offered a set amount of paid sick days during a given term/year, as well as a set amount of paid vacation days, and a set amount of paid/personal time off (PTO) to be used for personal business, etc.
According to the most recent available data from the Bureau of Labor Statistics, about 56% of US employees are subject to non-consolidated leave policies, which, while still a majority, is down considerably in just the last few years and is hanging onto that majority status by a thread.
This kind of leave segmentation is in many ways more the natural evolutionary byproduct of paid leave plan administrators adding new types of leave piecemeal over time than it is a cohesive policy conceived in pursuit of some specific aims, but there are nonetheless advantages that non-consolidated leave policies can potentially wield over the newer, less-structured alternatives.
The main advantages that non-consolidated leave policies provide employers is a greater degree of hands-on control that may enable them to better tailor leave policies in line with the needs of both the organization and the employees.
For example, sick days can be deemed to rollover from one term to another in order to encourage employees to come to work when capable while knowing that those days aren’t lost if they find themselves experiencing a more significant, contagious, and/or long-term illness or injury down the road.On the other hand, vacation days may be deemed not to rollover, thereby encouraging employees to take the breaks that have been afforded them in order to relax, recharge, and return to work ready to produce at a high level, which is in all parties’ mutual interest.
Further, sick days, personal days, and vacation days can potentially be set to accrue at different rates based on different inputs in line with business needs, as well.The disadvantages to non-consolidated leave policies, however, are largely centered around enforcement difficulties and the additional administrative expenses incurred to manage them. While employers may have an interest in having their employees use sick days only when they are sick, the process for confirming and documenting proper leave utilization can be cumbersome, invasive, and/or lead to ill will between workers and management that is outsized relative to the perceived advantages that are attained.
Consolidated Leave
In consolidated leave policies, time made available for employee leave - whether for vacation, illness, personal business, or otherwise - all comes out of the same collective pool (sometimes referred to as a PTO bank) with no need for segmentation into leave categories.
As of the most recent data available, about 44% of US workers who have some kind of PTO work under consolidated leave plans, although that number climbs to over 50% when measuring only workers who receive paid vacation days (as of 2023), in contrast to the fewer than 25% of workers with paid vacation who had consolidated leave plans back in 2010.
Clearly, consolidated leave plan adoption has been on the rise, and while they do not share some of the employer-tailoring potential that non-consolidated plans can offer, consolidated plans do have the benefit of allowing employees to tailor their leave utilization in line with their own motivations and interests, which is a selling point in its own right and a meaningful one from the vantage point of many employees.
Consolidated plans also immediately remove the sick-day skepticism that can poison working relationships between workers, managers, and coworkers alike, in addition to cutting down on costs associated with collecting, tracking, and storing certain leave utilization documentation.
Unlimited Leave
The latest trend in leave policy takes consolidated leave flexibility one step further by not only consolidating the different types of leave into one PTO bank, but also removing the cap on the number of days in that bank so that the number of PTO days available to a given employee is technically unlimited.
According to a recent report from the International Foundation for Employee Benefit Plans, about 9% of private employers surveyed had adopted an unlimited PTO policy, which comports with the 8% of companies offering and 10% of employees being offered unlimited PTO as reported by Zippia.
Further, 87% of those employers offering unlimited-PTO have begun doing so within the last 4 years, and Indeed reports that the number of job listings referencing unlimited PTO grew by 40% between 2019 and 2023, so the growth trajectory for unlimited leave is even steeper than that of consolidated leave has been.
While an unlimited PTO model may sound like a dream to many workers and a nightmare to some employers, the reality so far has in many ways been the opposite.Workers who may envision themselves going on regular extended sabbaticals more often than not actually find themselves taking fewer days off work under the unlimited PTO model than they did with a set number of PTO days. Such employees often cite a heavy workload, social stigma, coworker/manager coordination, and not wanting to offload responsibilities to others as some of the main reasons for underutilizing the opportunity to take leave. In fact, workers with unlimited PTO take only an average of about 13 PTO days per year.
Employers, on the other hand, who may be reluctant to adopt the unlimited leave model for fear of mass employee absenteeism not only end up with employees working more than before, they also can eliminate carrying the liabilities associated with accrued vacation days on their accounting books and can avoid paying out on unused PTO to terminated employees (as is required in 19 states: CA, CO, IL, IN, LA, ME, MD, MA, MT, NE, NH, NM, NY, NC, ND, OH, RI, WV, WI) simply because there are no longer any PTO days that have accrued.
Those kinds of advantages may become increasingly hard for employers to ignore, even as employees adjust to the new system and begin to utilize it more to their own advantage, as well.
PTO Laws By State
While a majority of states (27) have some form of PTO law on the books, the scope ranges from relatively small (as in Louisiana's requirement that each employee be given one day of PTO for jury duty or Virginia’s requirement that home health workers who work at least 20 hours per week receive one hour of paid sick leave for every 30 hours they spend on the job) to much more broad in application (like Nevada’s law requiring employers with more than 50 employees to provide 0.01923 hours of PTO (capped at 40 hours per year) for every hour worked, which employees can use for any purpose.
The following states have enacted at least one law with regard to PTO for private employers/employees, the vast majority of which focus on sick and family leave:
- Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Tennessee, Vermont, Virginia, and Washington
The following states have no current laws mandating any form of PTO:
- Alaska, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Montana, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington D.C. West Virginia, Wisconsin, Wyoming
Mployer Advisor’s Take
While there are a few potential advantages to non-consolidated PTO, many of those advantages in terms of shaping employee PTO usage are often more theoretical than practical, whereas the additional burdens of verifying and administering non-consolidated PTO are very concrete.
Though non-consolidated PTO remains the majority position for the time being at least, all the momentum seems to be behind consolidation.
Whether that momentum will ultimately carry the unlimited leave model and its even greater levels of flexibility to become standard business practice and the majority approach among employers remains to be seen, but unlimited PTO certainly seems to have the necessary tailwinds behind it to make that outcome a real possibility.
Despite the practical downsides for employees with unlimited PTO - which employees will adapt to over time and which employers can mitigate through proactive efforts to help encourage culture shift and encourage optimized leave utilization - the idealized promise of unlimited PTO remains a strong draw for talent from a recruitment and retention perspective.
Further, employers would be ill advised not to consider the potential benefits that can be immediately realized from a liability perspective when the policy is implemented, especially if they operate in a state that considers accrued PTO to be equivalent to wages and/or mandates the payout of accrued PTO to employees that have been fired.
The right PTO arrangement may very well be a little different for any given employer based on what they do, where they are, and what they hope to accomplish via the policy, but consolidation and unlimited PTO offerings are clearly not only attracting the interest of a growing number of employers, but many of those employers who take a closer look are liking what they see and making a change.
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