Back To Compensation Today

How to Curb PTO Abuse and Reduce Absenteeism with Compensation Planning

Topics: Comp Strategy
Tess C. Taylor, PHRIs your company’s paid time off policy becoming a joke around the water cooler? Maybe you are noticing above average call-outs from employees for frivolous reasons? Perhaps no other human capital issue has the negative impact that frequently absent and sick employees create for a business.

Is your company’s paid time off policy becoming a joke around the water cooler? Maybe you are noticing above average call-outs from employees for frivolous reasons? Perhaps no other human capital issue has the negative impact that frequently absent and sick employees create for a business.

For the smart HR leader, PTO abuse and high employee absenteeism rates signal problems that are deep within the core of the business itself. This can be an opportunity to take action and make positive changes in the compensation structure.

The Cost of PTO Abuse and Employee Absenteeism


Learn More About Our Compensation Software


When employees fail to report to work or take too many paid days off, obvious staffing shortages and lower productivity occur. Studies have shown that the total cost of frequent employee absence and paid time off abuse can range from 20 to 35 percent of the payroll budget. Nearly 10 percent of this alone can be attributed to non-planned absences. To put this in perspective, the average cost of health care benefit premiums is 10 to 15 percent of total payroll.  It’s clear that PTO abuse and incidences of employee absences cost every business a great deal in lost revenues.


Reasons for Unplanned Absences and PTO Abuse by Employees

Many HR teams struggle to put a stop to PTO abuse and frequent absenteeism of employees. Mainly this is because there is a general misunderstanding of the causes. There are a number of factors that contribute to above average incidences of paid time off abuse and unplanned absences. These may include:

  • Poorly managed time recording systems and PTO policies that are difficult to enforce.
  • Employees who are overworked and stressed out from an abundance of projects.
  • Lack of challenging tasks and career growth potential that leads to boredom.
  • Supervisory team that does not encourage the value of good work ethics and attendance.
  • No support for employees who need work-life balance due to family or personal burdens.
  • Dissatisfaction with the company or assignments due to mismanagement and restructuring.

Fortunately, these and other problems are not as difficult to correct as one may think. There are some effective ways of stopping PTO abuse and excessive absenteeism in their tracks.

Curbing PTO Abuse and Reducing Absenteeism Rates

The job of the human resource department is to pinpoint the reasons for frequent employee absenteeism and paid time off abuse. The obvious place to start is with the employees themselves, through a confidential 360 degree survey. Reviewing the performance and compensation records of employees who call out sick or attempt to take more days off then the allotted number of days is another good avenue. Sometimes, the company just needs to roll out a reminder to all employees of the PTO policy with consequences and rewards communicated and carried out.

Putting a stop to PTO abuse can take some strategic compensation steps, however, which can include the following.

  1. Increasing Employee Job Satisfaction
    When employees become disillusioned with their roles, tasks, and the company as a whole, they tend to find excuses to skip out on work. On the other hand, a satisfied workforce is more apt to arrive at work on time, ready to handle the challenges of every project, and not miss time for fear of getting behind. Create more feelings of dedication and loyalty to the company by finding ways to increase employee job satisfaction. Employee recognition, corporate wellness programs, and compensation increases are a good place to start.
  2. Providing Incentives for Enhanced Motivation
    Employees who believe they are being compensated fairly for their work and efforts will return the favor by working hard and not missing much work. On top of this, having a well-managed employee incentive program can help to augment salary and benefit packages. While the notion of reward and punishment may seem rudimentary, it can be effective in motivating the workforce. When employees perform well and don’t abuse PTO policies, they should be rewarded with added financial and career incentives. Those who continually abuse PTO or become low performers must go.
  3. Offering Flextime and Telecommuting
    One of the more effective ways to add to your compensation strategy, while reducing PTO abuse and absenteeism is to give employees the option of working remotely at least a couple of days per week. Another option is to offer more flexible schedules so that employees can choose to work four, 10-hour days instead of five, 8-hour days.  Both of these options work especially well for employees who have personal demands such as raising children or being caregivers to parents. Having a few extra hours a week to focus on these matters can make a huge difference in the performance of employees and reduce paid time off requests.

More than 2,500 organizations use PayScale’s subscription software to:

  • Allocate raises. PayScale Insight allows you to allocate raises based on employee performance and labor budget.
  • Attract talent. Price jobs based on your local market and competition.
  • Retain employees. Get pay right and show them how you did it. Your employees will be more satisfied to stay.
  • Drive performance. Get their salary right so they can focus on doing a good job.
  • Be confident. With know-how to talk about comp with anyone.

What are you waiting for?
Get Demo Now!

Tess C. Taylor
Read more from Tess C.

Leave a Reply

1 Comment threads
0 Thread replies
Most reacted comment
Hottest comment thread
1 Comment authors
David Martinez Recent comment authors
newest oldest most voted
Notify of
David Martinez
David Martinez

WHAT ABOUT THE EMPLOYEES? Do you discuss or review any of these issues in the interest of the employee? For example, what happens to an employee (In California) who is over worked and understaffed and whose “roll over” hours of PTO are lost? Doesn’t he/she have any legal recourse? As we ALL know, that with the economy as it is more and more companies are trying to do more with less. This is something we see everywhere. So when an employee who manages an office (a one person office) and is clearly understaffed and the employer refuses to act upon… Read more »

Start the Transformation

We can help you bring modern compensation to life in your organization.