When newly-licensed social worker Javon Garcia was hired in late 2020 by Howard Brown Health, an LGBTQ nonprofit in Chicago, he was thrown into a new life as a virtual therapist. Between the pandemic-induced spike in the number of people seeking help and the absence of anywhere to go, he barely took any time off work.
So when Garcia got an email telling him he could trade some unused paid time off for cash, he lit up. Howard Brown offered that deal through a partnership with a startup called PTO Exchange. Garcia needed the extra money to cover a bill. “Oh my gosh, this is perfect timing,” he thought. He promptly cashed out $300 worth of PTO to cover his expenses.
Garcia took a deal dangled before a growing number of US workers, whose PTO balances swelled during the pandemic. Startups have popped up in the past several years to help employers offer to buy out workers’ unused vacation days. The pitch to employees: Get paid cash for time off you earned. To employers, PTO Exchange and its rivals argue that the programs improve retention and lighten a major financial liability for companies that pay out unused PTO when an employee leaves.
Vacation days cashed out today can save a company money, because if paid out later, when an employee leaves, they may be earning a higher wage. (A policy of unlimited vacation can offer employers an alternative solution to the same problem: When no balance accumulates, there’s nothing to pay out.)
Yet swapping time off for cash is not the simple transaction it may seem. For one, most employers who offer cash for PTO won’t let employees sell all their vacation time, but most US workers get relatively little to begin with. And vacation time has value not captured by its cash equivalent. “The purpose of vacation is not to give people money but to sustain them through a career or a long period of hard work,” says Josh Bersin, an analyst who tracks HR technology.
To that, these founders say, the stark reality is that Americans don’t use all their time off, a phenomenon that long preceded the pandemic. In 2018, more than half of US workers left vacation days on the table, according to the US Travel Association, totaling 768 million days and $66 billion worth of forfeited benefits. Cash-out programs don’t address the root cause—after all, they incentivize taking less time off—but they can at least give employees some immediate compensation.
Many workers don’t receive the full value of their time. PTO Exchange, for instance, charges employees a 7.5 percent service fee on every transaction to support its business and avoid tax consequences for employers and workers. Some employers tack on an additional and sometimes larger fee of their own.