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.
Most PopularThe End of Airbnb in New YorkBusiness
Ballooning pandemic PTO balances have helped these programs spread. Back in 2020, entrepreneur Veetahl Eilat-Raichel repeatedly heard bosses complain that their housebound employees weren't taking enough time off. So late that year, she launched Sorbet. The startup plugs into HR systems to predict how much PTO each worker will take, based on factors like past behavior and seasonal workload fluctuations. It then offers employees the opportunity to cash out the PTO they probably won’t use, and can provide their employer a low-interest loan to cover the payment.
PTO Genius, another startup launched in 2020, nudges employees that its algorithm guesses are at risk for burnout—based on factors like long hours and behavior changes—to take vacation. The service can offer to cash out unused PTO to help an employer offload that liability. Rob Whalen, cofounder of six-year-old PTO Exchange, describes an influx in demand this year and says his company now works with 60 employers covering more than 200,000 workers.
“Bernie,” who asked to be identified by a pseudonym because he feared angering management, is a municipal government employee in Florida. He can cash out up to 35 hours of PTO each year—around a fifth of his combined vacation and sick time—and usually maxes out that allowance. He rarely takes time off, reluctant to saddle coworkers in his small department with extra work, and sees the program as a consolation. “It’s a way for people to get something back when they don’t have the protections of a union position,” he says, which can help workers assert their right to time off.
Lonnie Golden, an economics professor at Penn State Abington, part of Pennsylvania State University, who studies overwork and worker well-being, sees cash-out startups as quintessentially American. He can’t imagine them taking off in, say, Western or Northern Europe, where, he says, “there's social and organizational pressure to spend more time in your nonwork activity.” The US is the only rich nation that guarantees no paid vacation time. Nearly one in four US workers, most of them low-income, receive no PTO at all.
For some employees, trading in their PTO is not a simple transaction—and cash may not be an option. The software platforms employers use are highly customizable and can give workers the option of converting the cash value of their time off into retirement savings, student loan payments, charitable donations, or travel costs. Some uses might convert PTO at a higher rate than others.
But cash appears to be what employees want, says Sorbet’s Eilat-Raichel. “For the most part, employees just want to use this for gas and for Pizza Hut,” she says—extra help with routine expenses. One former employee of the genetic counseling company InformedDNA, which uses PTO Exchange, says that cash wasn’t an option. She asked not to be named to avoid conflict with the company. After racking up a glut of PTO during the early days of the pandemic, she exchanged her time for a hotel room at a friend’s wedding. “I was glad I could use the hours for something,” she says. “But I would have preferred just to get money for it.”
Most PopularThe End of Airbnb in New YorkBusiness
The employee also wasn’t sure if the value of the hotel equaled the value of the time she’d earned. It probably didn’t, given PTO Exchange’s standard fee. InformedDNA didn’t respond to questions from WIRED about its program.
As the economic climate grows less certain and some companies begin to shed staff—triggering payouts of unused PTO—Eilat-Raichel sees cash-out programs as a way for employers to reclaim some balance sheet predictability. But Bersin, the HR analyst, says the potential recession has employers more focused on productivity. That suggests they should want employees to use all their time off, he says, because well-rested people get more done. “You really want to have a work environment where people are taking vacation, because then other people feel comfortable taking vacation,” he says. “If you want to give somebody some money, just give them the money. Why take it out of their time off?”
In July, Javon Garcia left his job at Howard Brown. Nearly two years of working through the pandemic in relative isolation burned him out. He’s glad he could cash out his time when he needed the money, but what he ultimately craved was a break. He’s now traveling through Europe. It’s unpaid—but much needed—time off.
WIRED has teamed up with Jobbio to create WIRED Hired, a dedicated career marketplace for WIRED readers. Companies who want to advertise their jobs can visit WIRED Hired to post open roles, while anyone can search and apply for thousands of career opportunities. Jobbio is not involved with this story or any editorial content.