0:00:05: Welcome to The HR Tech Spotlight podcast. I’m Deanna Shimota, CEO of GrowthMode Marketing. The HR technology market is crowded, and we know it can be hard to find the best software solutions for your business in the sea of sameness on this podcast, we shine a spotlight on some of the best up and coming technology options out there. Check it out if you are interested in learning about new, innovative solutions available in the market, and if you are with an HR tech company and interested in being considered for a guest spot, stay tuned for details at the end of the show.
0:00:45: Hello, everyone. On this episode of The HR Tech Spotlight, we are exploring PTO Exchange, a platform helping employees unlock the full value of unused PTO by converting it into retirement savings, student loan repayments, travel awards, community giving, and more. Joining me to talk about PTO Exchange is co founder and CEO of the company, Rob Whalen. Welcome to the show, Rob.
0:01:10: Thanks for having me, Deanna. I really appreciate being here.
0:01:14: It’s great to have you. So, Rob, tell us about your background in the HR tech space.
0:01:19: So a little bit about me. When I started the company, I had no HR experience, absolutely zero HR experience. And that was in 2013 when I started the company. My background is, well, let’s say my education is in accounting, but my background is 30 years in technology. And so I’ve been selling everything and building things. Everything from semiconductor selling. This is my fourth software company that I’ve built, my fifth company or 6th company.
0:01:57: So really just an entrepreneur that is looking at the world in a way and trying to find problems to solve. And in 2013 had a dinner with a bunch of other entrepreneurs, and we looked at different big opportunities that we could solve or different big problems we could solve. And I had just left Cisco systems. There’s actually two of us at the dinner that left Cisco systems, and we got a big check from our paid time off that they owed us.
0:02:28: So I think I had accrued 280 hours and got a very large check, and so did he. And we were just chatting about it over wine and with everyone else saying, wouldn’t it have been interesting if we could have used it to go on a vacation with our families that we may not have been able to afford, or an experience or put it into our 401K on those years that we couldn’t max out our four hundred and one k?
0:02:56: And I think that was kind of the light bulb moment that we looked at. I then spent a better part of 2013. I worked another job. So this was in the evenings. All of us were doing this. Then I did the research around the market and realized that the market was very large and that there was a very big problem. It wasn’t being solved. And so that’s when I started PTO Exchange.
0:03:24: Very cool. So let’s talk a bit more about what PTO Exchange does.
0:03:32: So what PTO Exchange does is we are really building flexibility into benefits. Okay? That’s really what we’re doing. But paid time off is a big accrued benefit. And so we look at that as part of your income or part of your compensation, and we think that you should be able to use your compensation in different ways that supports you through your transitions in life. What we allow companies to do is to implement our platform, allow their employees to spend some portion of their pay time off that they may not use for anything from 401 to HSA to paying down student loans, tuition, using it for emergency or cash out.
0:04:29: So that is really what we do. So we allow companies to build flexibility into their benefits so employees can use those to meet them in their moments in life.
0:04:44: So you obviously, as an organization, work with a lot of companies and helping their employees leverage their PTO in different ways. How prevalent is it for people not to use all their PTO up?
0:05:01: So roughly, on average, everyone gets three weeks of paid time off a year, and roughly one week of that goes unused. So if you can think about it, if you were to give a week of salary back to the company, that’s exactly what they’re doing. They’re giving the productivity and not getting paid for it. And that’s what happens when people leave paid time off or PTO on the books. And companies have learned this, right? And so they are actually going to unlimited. So people don’t use it and don’t see it, and that’s kind of what’s going on.
0:05:52: But, yeah. So roughly one week, which equates to roughly about $218,000,000,000, that goes unused in America every year.
0:06:03: Wow, that’s a lot I can’t fathom. I’ve been somebody who’s always, if it’s the end of the year and you had unused PTO, it’s like, well, I guess I’m taking some time off. But obviously, for a lot of people, that isn’t the case. They get the PTO, they don’t use it. Sometimes they don’t realize it until it’s too late in the year. And I know a lot of companies have policies where it’s like, you can’t just take the entire month of December off. Right, or whatever their fiscal year.
0:06:33: Right. I mean, if you’re in retail, Deanna, the fourth quarter is retail’s largest. It’s like 60% of the revenue, 70% of the revenue. So they’re not going to allow employees to take time off during that time period. So if you haven’t taken your time off into August, then it’s going to be very difficult for you to get the time off for that in December. You have these industries, like retail, like healthcare, like manufacturing, right.
0:07:10: Where people, the company derives their revenue off of people being there providing the service. Okay. And so those organizations are less likely, or those employees are less likely to take all their pay time off because of the productivity necessary to meet the company’s objectives. And with hiring today, it’s hard to hire. Right. So that’s the other thing that’s going on in the marketplace today.
0:07:42: It’s very difficult to retain, attract and keep employees.
0:07:49: Yeah, that makes sense. I mean, there are definitely different industries out there that the way that employees work and manage is much different than if you’re an office worker and you take a week off. You still have to have people to run the manufacturing plant. You still have to have people to stand at the cash register at a retail store. So I totally get what you’re saying. As you think about this, I think it’s kind of clear what the benefit is to employees.
0:08:20: They’re not losing it. They’re using it in different ways to benefit them. What would you say are the big benefits to the employer of looking at a solution like this?
0:08:33: Just to give you kind of where we’re at? So we have over 100 customers, over 300,000 employees on platform, and now we’re getting enough data to really understand the impact we’re having from a financial standpoint. Before, we thought we were having a good impact or a positive impact to the organization, but at this point in time, we’ve done some analysis on our data, and we have helped our healthcare companies to reduce their turnover by 70%.
0:09:06: Okay. We have some defense companies. We’ve helped reduce 62%. And these are savings that they’re not having to go out and hire and retain new employees. And we can see that in our system by the turnover that they have through the data that we have. So when you look at it from a company standpoint, if I can keep my employees, retain them, and keep that knowledge longer, I’m going to have better cost basis on my products.
0:09:44: Okay. The other thing that we see is in today’s marketplace where employees are trying to, or employers are trying to create more productivity within their organization, we can actually help them expand their productivity roughly two to 3%. And you go, how do you do that? Well, if you think about this, and I’m just going to give you an example. So let’s say, and this is just an example, you work for Costco and you work at the register, and that register they want open because that’s how they make their revenue.
0:10:20: Okay? So that person’s running the goods through the register and taking your money. When that person goes on vacation, they go on vacation, and I pay them on that week. I then hire someone to come in and run that register because that register can’t be down. So what I just did as a company, I paid two people for one week worth of productivity. Now, if I was to allow that person to cash out or use that week for 401 in a different manner, yes, I had to pay them, okay?
0:10:54: But I paid one person for that two weeks, and I didn’t have to go out and hire another person. So now I just reduced my medical spend, my hiring spend, all of those things, and I increased my productivity about 2% throughout my workforce. And we’ve seen that in the data that we’re seeing. So those are the positive things that we bring to an employer and their organization.
0:11:26: Those were some excellent examples to really demonstrate the value that PTO Exchange can bring to an organization. Obviously, there’s competitors out there. What is different about PTO Exchange from other solutions? That may be.
0:11:45: So we, we created the category. We’re the ones who have a patent around it. But I think what we bring to the party is just our expertise. We worked four years understanding paid time off and all the legal complexities and the compliance nature of it prior to even launching our product, because we didn’t want to be building a product and selling it to companies and not making sure that they were compliant.
0:12:21: Back in 2015, I was invited to the joint committee for Taxation by Dave Rikert here in Washington to speak about some of the laws that were in place that prohibited the low income worker and some of these issues from gaining steam. And so we work with lawyers and government officials around just understanding what it is. We’re now brought in with some of the larger consultant firms to advise their clients on some of the PTO policies and how to implement, whether it be with us or someone else or just doing it themselves, making sure that they’re compliant.
0:13:09: But I think that’s the difference between us and any competitor, is that you’re going to get experts that know this space so that you can build a benefit, that one helps your employees, but also keeps you compliant.
0:13:28: What type of companies are really the perfect fit for PTO Exchange?
0:13:35: The perfect Company for us is a company that derives their revenue from their employees being on site or they derive their revenue from that employee’s time. And I gave you a couple examples already, but give you one, give you a couple more, actually, I should say so. Boeing. Boeing manufactures plane. You can’t manufacture a plane without people there, right? People have to be there to rivet, they have to be there to build the planes, to wire the planes, put the seats in to deliver those planes.
0:14:13: So they are a good prospect force healthcare nurse. They derive their services by being there by your bedside. Same with doctors. Right. Consultants they bill. Right. So if they’re on vacation, they’re not billing, they’re not generating revenue. Okay. If the person has to be there. Retail is another one, like I stated before, is another good one where the company derives their sales or the value of their service through the people being there on premise.
0:14:49: So those types of companies are really good for us mainly because we can show a financial impact for them.
0:15:01: Is there an employer size that is a good fit?
0:15:07: So we have a 15 employee nonprofit and we have a 55,000 retailer. But I will say from 500 to 10,000 is kind of our sweet spot, meaning the sales cycle goes a little quicker. And it seems like they’re looking to provide unique benefits over and above the larger, like the Microsoft’s or the right. They don’t have the money to provide these luxurious benefits, even though they’re cutting their benefits back.
0:15:43: So they’re looking at trying to use this already budgeted benefit called pay time off, that’s accrued in a different format so that they can build flexibility and individuality through their benefit platform. And that’s really why that 5000 employee space is a good space for us.
0:16:05: What is the future vision for PTO Exchange?
0:16:13: So the future vision of PTO Exchange is we’re going to continue to build more flexibility throughout the benefit ecosystem. And what I mean by that is 30% of your compensation is benefits. Okay. And you use it or you don’t use it. Right. And you don’t understand it. And so we want to build more flexibility within that 30% of your compensation so that you can help self direct that benefit or those benefits, so that you get more utilization out of it as an employee and as an employer.
0:16:53: Right. If you go to, I mean, you were at HR Tech, if you go and talk to anybody about what engagement looks like for their product, benefits only get about 30% utilization. Any company that’s telling you they’re getting 50% utilization is, I think it’s a BS. Even healthcare, right? A company pays for your health care insurance and how many of the people go use a ton of it? It’s really there as an insurance policy.
0:17:29: How much of those dollars are really wasted? So I think that’s what we’re looking at. We’re looking at how do you make those benefit dollars more efficient to meet people where they’re at in life and everyone’s transitions are different and a way to support them. And I think you see a lot of that with, you never heard about fertility in the past, right? So all the fertility benefits that are coming out, and that’s because couples are having children later in life.
0:18:05: And yes, there needs to be more support through that ecosystem. And so companies are now looking at, how do we use the current dollars that we have to support those individuals because we want to retain them as employees, right. We do want them to stick around because they are a huge value to the company, but we can’t pay for everything, is what they’re saying. And so how do we leverage the dollars that we have today and support each of these unique transitions in life?
0:18:40: And that’s what.
0:18:43: That’s great. What would you say is the biggest hesitation that you see companies have when they’re considering implementing a solution like yours?
0:18:55: I think there’s a couple of things. One is regulations, which we usually help the attorneys and people get over, but sometimes companies are more conservative, and so they’ll say, not now, I want more customers or see more traction. And as we add more customers, that’s getting less and less, by the way. The other thing is, if a company makes money on the people not using their PTO, and I will give you an example, we worked with a cell company here, and they were really interested in implementing our product.
0:19:43: But what we found out was that their company makes $18 million off of the backs of their employees, of them not using it and the company not paying it out. Okay. And what’s really sad about that is that that $18 million wasn’t made off of the executives, and it wasn’t made off of the middle management. It was made off of their call centers, their lowest paid employees, and they didn’t want to pay it out because the turnover was so high and they would have to pay it out.
0:20:16: And to me, it’s like you have turnover because you’re not paying it out. You’re not supporting them. And so it’s a vicious cycle. But the fact is, PTO is an earned. It’s earned, right. It’s not something you work and you earn it. So it should be the employees and they should have access to it, and they should be able to get it paid out when they leave. All those types of things. But in answering your question, which is, what are the hurdles of companies, companies that look at their balance sheet and say, we make money off of them not using it, are we going to change their behavior?
0:21:01: Probably not. Right. Whereas if we go to a company and says, no, we believe that all of our employees should use all their PTO. This is earned. We want to take care of our employees. Those are the companies that we work with. Right. The companies that really want to take care of their employees, that really feel that earned. PTO is theirs to take, use and have.
0:21:31: That makes sense. And the thought running through my mind as you were giving that example is it may look like on the balance sheet that you’re making that money back when employees don’t take that vacation, but if you have really high turnover rates, are you really making that money? No. I mean, it’s expensive to replace employees. Right. And hard. And the longer you have a role unfilled, the more costly it is to an organization. So you kind of have to have a perspective around the dollars on the sheet versus the reality within the organization.
0:22:07: I think, yes, 100%. And that’s what we see. Right. And so the companies that have chosen to work with us, we feel, are the companies that are looking at innovation, trying to watch their dollar, but trying to make every dollar available to their employees that they’ve earned. Those are great companies to work for.
0:22:32: Definitely. So what final thoughts do you want to leave our audience with?
0:22:37: Say that again.
0:22:39: What final thoughts do you want to leave our audience with?
0:22:44: I think the final thoughts are, as we progress as employer and employees, I think making sure that we’re paying people appropriately and that we’re giving the benefits that are necessary to meet employees where they’re at and the flexibility that now is kind of becoming common in the workplace for them. So I just want everyone to think a little bit differently. Right. When 401K came out, nobody really wanted to do it because it cost money.
0:23:22: Right. But it was good for the employee. It was good for the employer. In the long term, I think we PTO Exchange is very similar to 401K, which is, yes, it’s innovative. We have 100 clients. But I think in the future, I think it’ll be similar to 401K where everyone will have it and it’ll be a benefit that everyone will just demand. So just like to leave the HR community with keep innovating and keep looking at different solutions that benefit the employee and become an employee first company.
0:24:00: Well said. Where can our listeners go to learn more about PTO Exchange?
0:24:05: So obviously you can go to our website at ww ptoExchange.com. You can also reach out to us via [email protected] or you can reach me on LinkedIn.
0:24:20: Rob, thanks so much for joining me on the show today.
0:24:23: Deanna, thanks for having me.
0:24:26: For those listening, be sure to check out PTO Exchange. I’ll drop the links down below in the show notes.
0:24:32: Thanks everyone.
0:24:41: Thanks for listening to this episode of The HR tech Spotlight podcast where we showcase some of the best up and coming HR technology options in the market. If you are an HR tech company leader who would like to be considered for a guest spot on this program, please contact me via gross mode marketing or reach out to me on LinkedIn and if you found this show informative, subscribe, connect with us on social media and leave a review.
0:25:10: This is Deanna with GrowthMode Marketing signing off. Thanks for listening. We hope you’ll tune in again next time.