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By Gerry Langeler

Over the past decade or so, companies have moved from separate “sick time” and “vacation time” allocations to a more flexible and employee-friendly “personal time off” or PTO approach.  For well-established firms, this makes a lot of sense, as it rewards employees who stay healthy with more actual time off, and doesn’t encourage skirting the truth about whether one was sick or just needed a break from work.
My personal favorite story was from the pre-PTO days when a young woman in my firm called in to take one of her sick days on a sunny spring morning.  The next day she showed up at work with “reverse raccoon goggles” and a cast on her leg – courtesy of a day on the slopes.  Busted!
But for early-stage start-ups, PTO comes with a downside, one we’re living with right now.  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, we have a firm with over $250K in the bank, but we 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 Valley.  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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