No, I am not talking about some Parents-Teachers Organization. I am no parent to any kid out there. You see more and more companies are offering a benefit to their employees usually referred to as PTO (personal time off). It is supposed to help the employees be really honest about their reason for not showing up or their desire to miss a day or few days from work. Sometimes things work as hoped for. However, if your start-up has this benefit in writing for its employees, when things turn sour it may very well be a liability you may regret.
PTO that is not taken, perhaps allowed to carry over from prior years, or that was taken but never accounted for properly, builds up into a statutory liability for the company and a potential personal liability for its directors.
If the company ends up failing, it is obligated to pay out all that accumulated value to its employees as part of the shut down process. If the company doesn't have the cash, the Board members must come up with it out of their own pockets. Needless to say, no one is going to let this happen, so the behavior it drives is to force the company to make a shut down decision while there is still enough cash in the bank to cover all those statutory liabilities.
This can materially reduce the time for the ever-hoped-for miracle event to occur that might avoid the abyss. Right now, I know of a firm with over $250K in the bank, but the board may have to shut it down or fire-sale it because there is about $250K of PTO "overhang" hanging like the Sword of Damocles over the firm. On the other hand, if we could run the company off that cash for a month or two more, perhaps something good could happen on either the customer or M&A front.
There is a better way, and it is a way gaining favor with many start-ups in the New England especially in New Hampshire. You run the company with no time-off policy at all! Time off is between you and your manager. There is no vacation or sick time accrual, no build-up of liabilities that can hurt you later. If you are getting your work done and clear the time-off with your manager, take what you need. The risk for abuse on the employee side is handled by the performance review process. If an employee abuses the system, they either don't get a raise, or don't get that next exciting assignment, or in the extreme don't get to work at the company any more. The risk for employer abuse is handled by good employee mobility. If the company isn't reasonable about allowing time off, employees will take their talents elsewhere.
The "no policy" policy probably takes some getting used to. But it could give your start-up the little bit of flexibility it needs to make it past a very difficult period, a period that otherwise might mean the end for everyone.
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