My firm doesn't consider Christmas a holiday. We don't give employees a day off on Memorial Day. Fourth of July? No. Labor Day? Uh-uh.

Lest you think we run some kind of Ebeneezer Scrooge-style sweatshop, let me clarify: More than 20 years ago, Davis & Company stepped away from the traditional "leave" program most companies use, with separate allotments for holidays, sick days, personal days and vacation days. Instead, we adopted what's known today as a "paid time-off" (PTO) system--a bank of days from which employees can draw for any reason: illness, vacation, doctor's appointments, etc.

Apparently, we were ahead of our time. A 2010 survey conducted by WorldatWork, an association of human resources professionals, shows that PTO use grew by 43 percent from 2002 to 2010, while traditional programs declined by 24 percent. A few details about our plan:

  • We included holidays. (Most companies don't.) We officially close our offices for major U.S. holidays, so an employee can either use one of his/her PTO days or work and save his/her PTO for another time. (Almost everyone uses PTO to take the holiday.)
  • We give a lot of time off: 30 days a year for a new employee, and up to 39 days for a long-tenured worker. So nobody bemoans the "loss" of holidays or sick days; they've got plenty of days to use.
  • A new employee can take time right away (to be precise, one month after he/she starts). PTO is accrued at the rate of 2.5 days a month for new hires and those with the company for fewer than three years. If a holiday falls within an employee's first month, he/she can borrow the day from the next month.
  • Time earned during each year must by taken by December 31, except for five days that can be carried over into the following year.

The result? We've seen three very positive effects:

  1. Fewer unplanned absences. Sure, people call in sick when they're sick or a child is under the weather. But we encourage employees to schedule any other PTO day with their manager. So we usually know when people will be out, and can plan our work accordingly.
  2. Employees "own" their time off. They're in control. And guess what: Because we treat them like adults, they act like adults.
  3. Better morale. We ask employees to work hard, but we also want them to take their PTO to reduce stress and recharge their batteries. (Most Americans are bad at taking time off; we're trying to get good at it.)

Our PTO program is simple, but it's had a big impact. (If you'd like to learn more, I'd be happy to share the details with you.)