Human Capital & Careers

Clocking R&R

Software that tracks the real cost of paid time off.
John EdwardsMay 3, 2005

For centuries, humans have wres-tled with the concept of time. In most cases, time wins. In fact, time is such a difficult idea to comprehend—so ephemeral, so relative—that digital-clock makers should be forced to put quotation marks around their LCD readouts.

The concept of time appears especially confusing for certain workers who seem to have difficulty ascertaining how much vacation time they’ve taken. Michael Edwards knows all about that problem. As deputy CFO for Chicago Public Schools, Edwards is in charge of paid time off (PTO), the vacation, personal, and sick days the school system’s employees are entitled to.

Like managers at lots of organizations, officials at Chicago Public Schools are paying closer attention to PTO these days. Indeed, with many businesses and not-for-profits already running extremely lean operations, time off is one of the last areas in which managers can squeeze a few bucks out of operations. AppMail, a San Mateo, Calif., human resources software company, estimates that employees’ underreporting of the time they’ve taken off is costing U.S. businesses approximately $70 billion a year.

It’s not exactly clear how Appmail came up with that number. And it’s not clear if the survey includes workers who never take their full allotment of vacation days—not uncommon in industries like publishing and health care, or at smaller companies. Nevertheless, several software makers have begun offering programs that aim to help companies deal with a complex tangle of PTO management rules. Such vendors as AppMail; Chelmsford, Mass.-based Kronos; and Boulder, Colo.-based Unitime Systems are now rolling out beefed up PTO applications that slot in with leading payroll systems.

Time, Money: A Connection?

Analysts say PTO-tracking tools are not for everyone. Businesses with straightforward PTO frameworks will likely find their needs met by mainstream payroll software. But managers facing a welter of strict internal policies (think government entities or highly unionized businesses) often find that standard payroll applications lack the flexibility needed to fully handle PTO tracking. Such organizations often end up managing PTO data manually, which is to say, poorly.

Subpar PTO tracking can lead to costly mistakes when clerks, addled by complex rules, fail to properly record employee leave time. And sometimes the mistakes aren’t accidental. “Say, for example, the clerk likes me and doesn’t charge me a sick day,” says Edwards. “What ends up happening is the organization has a large liability in accrual for sick and vacation days because they haven’t been charged properly.” In an operation like the Chicago Public Schools system, with more than 55,000 employees in more than 100 buildings, the potential for abuse is sizable.

Even a relative handful of PTO-tracking mistakes can cause problems. A large amount of unused time off can create an overhang on a business’s balance sheet. “If workers don’t take their vacations,” notes Lisa Rowan, an HR management analyst with International Data Corp., a technology market research firm, “that’s a liability that remains on the books.”

Of course, that liability vanishes if companies don’t allow workers to roll over unused vacation days. And less time off tends to increase worker productivity, which explains in part why U.S. workers are generally more productive than their European counterparts. But PTO software’s ability to automate error-prone processes can help curb losses caused by clerical confusion. It can also pull up the names of employees with perfect attendance records extending over several years, a possible sign of PTO cheating.

For Edwards, the proof is in the numbers. “Our payroll is about $3.8 billion a year,” he says. “Take 1 or 2 percent of that, and think of the dollars that can be saved just by tracking your PTO.”

No word on whether the PTO software requires a doctor’s note before registering an official sick day for a teacher.