At a time when HR teams are focused on meeting the evolving needs of their workforces, flexibility has emerged as a major priority. Employees have questioned traditional working arrangements like never before in recent years—a process catalyzed by the shift to remote and hybrid work, but which has extended to areas like professional development and benefits programs. This is why it’s no surprise that the adoption of flexible benefits is on the rise. 

For example, companies are increasingly exploring PTO conversion as a way to help employees take full advantage of the time they have earned and meet their financial goals. PTO conversion enables employees to exchange the value of their unused time off for other financial benefits and priorities, such as student loan payments, retirement contributions, and charitable donations. PTO is widely underused, despite the fact that it’s a pillar of benefits programs for most companies. When HR teams implement a PTO conversion plan, they ensure that this benefit won’t go to waste and give employees the flexibility they’re demanding. 

It’s time for HR teams to think more creatively about the benefits they offer. They must adapt to rapidly shifting employee expectations and the realities of the modern workplace, which will help them attract and retain talent, increase engagement and productivity, and ensure that they’re improving employee well-being in a holistic way. 

Why the status quo isn’t working 

The growing demand for flexible and customized benefits isn’t the only factor driving HR teams to consider new approaches to PTO. HR teams also recognize that the PTO status quo is dysfunctional—78 percent of employees don’t use all their time off, a proportion that jumps to 83 percent for Millennials and 89 percent for Gen Z. This doesn’t just deprive employees of the full value of a major benefit—it also creates large financial liabilities. Many states require companies to pay out the full value of unused PTO upon employee separation and impose steep fines and other penalties on those that fail to do so. 

While many employees fail to take all their time off because they’re concerned about their workloads, the perceptions of colleagues and managers, and missing opportunities at work, Pew reports that a major reason for leaving PTO on the table is that employees “don’t feel they need to take more time off.” Why should these employees be forced to forfeit the value of their PTO? Convertible PTO can also address a growing crisis of financial stress in the workplace. According to a recent SoFi survey, 86 percent of employees feel increasingly stressed about their finances, which can lead to problems with mental health, motivation, and many other aspects of well-being. 

PTO is supposed to alleviate employees’ stress and improve their work-life balance, but many employees are more stressed about their finances than their workloads—PwC reports that 57 percent of employees say finances are the top cause of stress in their lives. Many employees would prefer to use the value of their PTO to improve their financial well-being, and HR teams should give them the option to do so. 

According to a recent Goldman Sachs report, the implementation of PTO conversion programs is one of the top trends in PTO in 2025. The proportion of companies that have deployed these programs is on the rise, which is part of a shift toward what Goldman Sachs describes as “paid leave and voluntary benefits that meet diverse employee needs.” This is consistent with a broader trend toward flexibility—for example, the recent SECURE 2.0 Act allows employees to receive matching contributions on student loan payments instead of 401(k) contributions. 

So, how does convertible PTO work? HR teams can integrate PTO conversion directly into their payroll systems and build a program around their specific needs. Because the funds have already been allocated, conversion programs redirect the value of PTO toward a wide range of purposes, such as student loan payments or 529 plans, HSAs, and retirement contributions. Employees can also use convertible PTO for travel rewards, direct cash payments, or even donations to colleagues who need time off. The tax implications for convertible PTO depend on what employees are using it for—if they want to cash out, they will have to pay regular compensation taxes. HR teams must be mindful of contribution limits if employees want to put money toward their 401(k)s or other relevant investment and savings vehicles. 

Instead of allowing huge sums of PTO to either be wasted or tacked onto the balance sheet in the form of unfunded liabilities, HR teams can use PTO conversion to give employees greater flexibility than ever in how they use their benefits. 

Important considerations for convertible PTO adoption

There are several guidelines that will help HR teams fully leverage convertible PTO. Beyond ensuring that employees are fully informed about all their available options and the tax implications of what they select, HR teams should have an ongoing dialogue with employees about their specific needs and concerns. For example, there are significant gaps between HR teams’ perceptions of employees’ financial well-being and the reality. Nearly three-quarters of employees say they want help with their finances, and the companies that focus on financial literacy and assistance will have less stressed and more productive employees. 

It’s also vital for HR teams to address the cultural issues that have created the unhealthy PTO status quo that exists today. Sixty-three percent of employees say the pressure to meet deadlines and maintain productivity deters them from taking time off. And even when they do break away from work, 60 percent of employees say they struggle to fully disconnect and 86 percent would check an email from the boss while on vacation. While many employees say they don’t need more PTO than they’re taking, it’s clear that HR teams must do more to address the culture of overwork that exists at many companies. 

PTO conversion can help employees get the most out of a core benefit that is currently going to waste on a vast scale and creating needless financial difficulties for companies. But as with any benefit, convertible PTO must be part of a comprehensive and adaptable strategy to improve employee well-being.