“Unlimited” PTO Design & Implementation Considerations

Trends on “Unlimited” PTO In 2010 only about 1% of tech employers were offering In 2014 13.9% of tech employers are offering Works best in results-driven companies with process of goals & objectives Linkedin announced this in Oct 2015 and describes it as part of their “Act like an owner” value. They call it “Discretionary Time Off”. Other notable companies: Adobe, Akamai, Netflix, Workday, Dropbox Smaller companies offering as perk to compete with larger, established companies: http://www.inc.com/suzanne-lucas/10-perks-your-small-business- can-afford.html

Challenges with current Accrual-based PTO programs Doesn’t reflect a company’s culture and values: “We realized … We should focus on what people get done, not on how many days worked” (Netflix Culture deck) “The workplace is no longer a place. It's anywhere workers happen to be, and wherever their ideas may take them. And ShoreTel is at the heart of this new reality.” (ShoreTel Careers page) For exempt employees, doesn’t reflect legal parameters of role: We don’t track hours worked, why are we tracking hours not-worked? “Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. Subject to exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.” https://www.dol.gov/whd/overtime/fs17g_salary.pdf Employees don’t take, or don’t report, or have confusion because of “hybrid” vacations: I’m on vacation for 4 days and the third day I have to respond to an urgent work email that ends up taking two hours to resolve – should I really be “docked” 8 hours for that day? Accrued balances can equal large $ amount which impacts finances Ties up money Creates a “cash out when you leave” reward program vs a utilized benefit

Design Considerations

Really, it’s that simple! Old Program Accrual of Hours New Program NO Accrual of Hours

Implementing Unlimited PTO The concept is simple but it’s the implementation and communication that is tricky: Will you track it? Will you require approval? How will it coordinate with your leave policies? Other ancillary policies: Holidays, Bereavement Leave, Jury Duty How will managers know how to manage it? Is your culture ready for it?

What do you want to achieve? ShoreTel Personal R&R: Recover and Recharge Results-driven – what matters most is people figuring out how to get the results that will achieve our business objectives (i.e. “work smarter, not harder”) Manage life and work schedules with more flexibility – we’d rather emphasize the importance of personally managing your own work/life situation instead of thinking about number of hours banked and when they must be used Paid Family Leave: 100% for first 6 weeks All LOAs approved under FMLA eligible to be paid at 100% for first 6 of the 12 week leave allotment

Tracking & Approval Spectrum No Approvals No Tracking No Corporate Tracking Manager Approval Full system of Tracking and Approvals

Consider your other leave policies Leave of Absence Holiday Bereavement Leave Jury Duty

Managing through the transition This is a cultural shift in our business and the way we view work and results PTO accruals set up a perception that Time = Money. It only becomes a reality when someone terms so over time a generous time off policy has turned into a “cash out when I leave” bonus. The goal is to give people time away from work WHILE they are working for us. Time away from work is not a monetary reward and recognition program. It is a benefit and everyone should be able to utilize it. While there is no immediate savings to the company, over time it frees up money that can be invested in resources vs being kept as a bonus to people who leave As a manager, focus instead on the monetary reward and recognition programs we have: Bonus plan, Commission plan, Spot bonuses, Equity, ESPP, 401k match

How to Have a Successful Unlimited PTO program Managers are key: Success of program relies on good relationships and open communication with employees Establish Expectations Quarterly and Yearly planning Coverage for vacations Shared calendars or OOO requests/email responses Avoid uncertainty Focus on Setting Clear Goals Ensure employees understand your expectations Goal setting training for managers Clarity around deliverables and measures of success Handling Unclear or Long Absence Requests Ask specific, appropriate questions to clarify the situation – type of absence? Find out what employee needs or wants Involve your Dept Exec and HR as appropriate – we are here to help! Use Your Discretion Focus on Legitimate Business Reasons (Impact to the Business) Focus on Employee Performance (Meeting Goals, Productivity, Future Planned Leave)

Helping Managers navigate new paradigm Absence request For Vacation/Leisure 4 consecutive weeks or less Manager approves or denies request based on business situation and employee’s role. More than 4 consecutive weeks Manager escalates to Dept Exec. Dept Exec approves or denies request For Other than Vacation 5 consecutive days or less Manager notifies HR as appropriate. Manager asks employee to come to them if situation changes and more time is needed. More than 5 consecutive days Manager consults with HR on determining if Leave of Absence.

Handling Existing Balances Exempt Employees – Multiple options depending on state and company States where it is not considered “earned” and don’t have to pay balances out upon termination: most extreme option is to just erase balances States where it is considered “earned” Pay out full balances Negotiate with employees to pay out balances at a partial rate Freeze existing balances and pay upon termination Stop accruals, leave balances in place for employees to use until they reach zero, then they transition to new unlimited plan Non-Exempt Employees Can’t really do away with accruals because of hourly requirements around minimum wage Can keep non-exempt employees on old system – pros and cons to this Contracts – Check current employee agreements, especially Executive agreements Many Exec agreements have specific vacation/PTO clauses determining amount and payout provisions

1 2 3 Summary Consider your company culture and current policies What problem are you trying to solve with unlimited PTO How will you implement and communicate it 1 2 3