Welcome to the Use Case Podcast, episode 241. Today we’ll be talking to Rob from PTO Exchange about the use case or business case for why his customers choose PTO Exchange.

PTO Exchange is a highly differentiating benefits platform that turns unused paid time off (PTO) into retirement accounts, student loan payments, donations, leave-sharing, charitable causes and more.

Give the show a listen and please let me know what you think. Thanks, William

Show length: 23 minutes


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Rob Whalen
Co-founder & CEO PTO Exchange

Rob Whalen is the Co-founder and CEO of PTO Exchange, the leading benefits platform that allows employees to self-direct the value of their unused paid time off (PTO) for other needs and causes. He is a serial entrepreneur that has over 25 years selling and developing software and hardware products, and a BA in accounting from Seattle University.

While building the company, Rob and his co-founder, Todd Lucas, found their mission was to enable flexibility into those benefits that employees earned but could not utilize. They also discovered that by enabling this capability and accountability, PTO Exchange created equity and inclusion for workers to be compensated for their accrued productivity creating a better benefit.

PTO Exchange was selected as a “Cool Vendor of the year” by Gartner in 2017 and awarded “Awesome New Technologies" at the Health and Benefits Leadership Conference in 2018.


Announcer: 00:02 Welcome to Recruiting Daily’s Use Case Podcast, a show dedicated to the storytelling that happens or should happen when practitioners purchase technology. Each episode is designed to inspire new ways and ideas to make your business better as we speak with the brightest minds in recruitment and HR tech. That’s what we do. Here’s your host, William Tincup.

William Tincup: 00:25 Ladies and gentlemen, this is William Tincup, and you are listening to the Use Case Podcast. Today we have Rob on from PTO Exchange and we’ll be learning about the business case or the use case for why his customers and prospects pick and choose PTO Exchange. So let’s just jump right into it.

Rob, would you do us a favor and introduce both yourself and PTO Exchange?

Rob Whalen: 00:47 Yeah. Thanks William for having me.

William Tincup: 00:48 Sure.

Rob Whalen: 00:49 Yeah. My name is Rob Whalen. I’m the co-founder and CEO of PTO Exchange. And we actually allow employers to provide a better, flexible benefit for their PTO. And this allows employees to self-direct some of the value of their PTO for what we call goods, services, or experiences. And it’s really intended to help you build more flexibility in your benefits and meet your employee or employees where they’re at in their life cycle. And that’s what we do.

William Tincup: 01:33 I love that. I love that. And I think, probably if you would’ve asked me 15 years ago, I was a fan of the unlimited PTO idea because I thought this is just a wonderful way to interact with employees. Just, let’s get out of the habit of asking what they’re doing and where they’re going and what they’re doing. And just, if they need to take off on a mental health day or they want to go visit the museum, it shouldn’t be our business. Go.

But what I found and I’m interested to get your take on this is that people wouldn’t take it. There was almost like a … It was almost like peer pressure. If they wanted to take a day off, they couldn’t take a day off because they felt pressured either internally or maybe they even self-pressured that they had to.

So we actually got rid of unlimited PTO and went to a PTO, kind of an old fashioned PTO strategy. Do you see some of the same things? I mean, it’s been a while, so there’s been modifications since then, but …

Rob Whalen: 02:39 Yeah, I mean, we see a lot of the unlimited conversation come up. We’ve seen customers go back from unlimited to kind of a regular accrued PTO. I think some of the things that you’re talking about William are the use cases of unlimited PTO, first of all, it’s kind of a lie. It is a lie because there’s no such thing as unlimited time in your life. Just doesn’t exist. But it doesn’t set the precedent of how much time an employee should disengage from the organization to re-energize themselves.

And as we all know, work continues. I’m going to leave here tonight and I’m going to leave work at my table here. And you really need to let your employees know that this is how much time they have. And by doing that, they feel ownership to take it. With an unlimited PTO, they feel like, “Oh my gosh, if I take it, one, how much can I take? How much will it’ll look down upon me within my organization, because I’m gone for two weeks?”

But studies have shown that people who have unlimited take less time off. But the real essence of unlimited paid time off William, it’s really the unintended consequences of a law that California put in back in, I think it was ’76. And what that was is that if a company accrues their PTO on their books, it is considered earned wages and needs to be paid out at separation. And the way to get around that is to not accrue it and just say, “Hey, you have unlimited.”

William Tincup: 04:43 Ah, I did not know that.

Rob Whalen: 04:45 Yes. And in this. So what happens is they don’t have to pay it out to you when you leave anymore. They could do a RIF and not pay anyone any PTO. Whereas if they do accrue it, then they have to pay that out when-

William Tincup: 05:00 Right, becomes a liability. Yeah.

Rob Whalen: 05:02 It’s a liability. But it’s also earned wages, William.

William Tincup: 05:05 Yeah, of course.

Rob Whalen: 05:06 This is something that people don’t get. And I’m just going to give you an example.

You go and negotiate a … Let’s just say you’re negotiating a $100,000 salary. And you used to be able to negotiate your paid time off. So you used to be able to go and say, “Hey, I came from Citrix and I had five weeks there. I’m going to Cisco. I don’t want to start at three weeks and I want five weeks.” Okay? And really what you’re negotiating there, and let’s just say it’s four weeks for an example, really what you’re negotiating William is you’re going to pay me $100,000 for 11 months worth of productivity. And I’m going to get the 11 month free, the four weeks of time off.

And what people don’t understand is we talk about our hourly pay rate. And the hourly pay rate is that $100,000 divided by 2000 or 2080 hours. Okay? But what you should look at is your productivity pay rate. And we look at this here at PTO Exchange. And the reason why you should look at that is because your productivity pay rate is your real pay rate, meaning that 11 months of productivity. So it would be 1920, or $100,000 divided by 1920. Okay? That would be your productivity pay rate.

If I give you one more week of work, if I only get three weeks off and say I work for you instead of taking that fourth week, my productivity pay rate, that hourly productivity pay rate goes down. So my pay rate goes down. Okay? So people don’t really realize that they are, if they don’t use their PTO, they’re actually giving free productivity back to the enterprise, back to the company and they aren’t getting anything in return for it.

William Tincup: 07:07 And what’s crazy about that is not only are they gifting it back to the company. They’re not taking that time off for mental health or physical health or to be with their family or hobbies or any of the other stuff. They’re just not using it, which I think, when you first spoke, one of the things I really loved about what you said is you put a value next to the PTO.

There’s a value to that I believe that you said that you can trade for good, services, and experiences, which again, I think is a mindset change for a lot of folks to then think of it like that. There is a value. There’s a finite value to this eight hours of PTO. And I can use it for any of the things that I would like to use it for, or I can trade it. I can use it in a different way that I haven’t thought of. I just love that idea.

Rob Whalen: 08:10 Yeah. No, it’s really resonating with employers and employees in today’s great resignation. And I think what employees are starting to find out is that they need to be met where they’re at in the life cycle. And PTO Exchange allows employers to do that. And I’m going to give you a few examples, William.

When you come out of college and you’re going to get your first job, what’s interesting about that group of workers is a lot of times they have student loan debt. Okay? Because they just came out of college. If you look at the real reason for paid time off, it is to disengage, to leave the company, and to re-energize yourself.

But if you have this liability, this debt hanging over you, you really feel pressured to pay it off. And if you could take a week of your paid time off, just one week of it, and pay that towards your student loan debt, would that be more energizing to you than taking that week off, helping you pay down your debt, which is another level of stress for you?

William Tincup: 09:36 Right.

Rob Whalen: 09:36 And the answer is yes. So that’s just the person coming out of college into the workforce. Take that same person and move them five to six years downstream. And now they’re 28 to 32 and they’re having a family. And now they’re saying, “Gosh, I can’t afford to take my three kids to Disneyland. It’s expensive. I have four weeks of paid time off. And I’d like to use two weeks of it to go on a two-week vacation so I could actually take my kids and afford it without putting it all on the credit card for more debt and give my kids and myself and my wife an experience that we may not have been able to afford.” And that is a great use of using your paid time off to incentivize people to disengage, but also give them a life experience without feeling burdened about it.

William Tincup: 10:42 One of the things I love is you’ve associated value. So it’s not nebulous. So we can agree that it’s not nebulous. There is a value. And then that value can be used in the form that it was originally intended. You can take time off. Or if you want to go to a museum, great, fantastic. Or now you have the flexibility to use basically that commodity and use it in a different way.

I think HR and benefits experts, I think they like this because it’s another way to interact with their employees and say, “Hey, there’s a flexibility here. You can use it in a number of different ways.” And giving them some of those suggestions that you’ve already given.

Rob Whalen: 11:30 Yeah. I’ll give you a couple examples of customers and how they used it and some of the things that they found out about when they used our platform. There is a company. It’s probably our third customer. There is about 200 employees. And there was a hurricane and this company is located in Florida. And they have the plans or the capabilities that they have turned on are sharing PTO. Right? They have giving and they have travel turned on. So their employees could use travel.

When this hurricane happened, there was a lot of employees that were affected and couldn’t. Their houses were flooded. They couldn’t really … When they used their PTO, they were just using it to survive. And the CEO took three weeks of his paid time off and gave it into a sharing pool so it could be disbursed to the employees.

And what was incredible about this is those hours go in at the CEO’s pay rate. And so when the rank and file of the employees accessed their hourly rate to get some more time, it actually helped a lot of his employees. And he didn’t realize this when he was doing it. But rumor got out that he had done this and all the employees started to send him thank yous. And he called us up and he says, “I did not know how your platform was really going to affect the culture of our company and what I did, I did not know what would happen, but now I feel like my employees are in the foxhole with me and they will do so much for me because I have done this for them. I’ve taken my time and given it to them.” It was incredible-

William Tincup: 13:33 Oh, I love that-

Rob Whalen: 13:33 … to see that happen.

William Tincup: 13:34 I love that. Why aren’t more companies doing this? Like, what’s the barrier? I guess that’s the real question behind this is for benefits administrators, and people that run kind of total rewards and HR, what possibly is the barrier for them to say no to this?

Rob Whalen: 13:59 Well, so I don’t know if you’re watching. Some of the companies that do go to unlimited, they make a lot of money. Right?

William Tincup: 14:09 Right.

Rob Whalen: 14:10 When they go to unlimited, they’re saving millions of dollars. Okay? EY took all their employees, and this is an accounting firm, took all their employees to unlimited. Their employees said, “This is just awful.” And they didn’t pay the PTO out. They made $36 million, and that $36 million went into the partner’s pockets. Okay?

So when you look at PTO, it’s a cost. There’s a cost associated. Your largest expense is your employees. Okay? For every business, your largest is expense. If you look at paid time off, that’s about 6% of your total employee outlay if you’re looking at it from a compensation standpoint. So companies that are looking at this and saying, “Hey, it’s a cost and we don’t want to do that because it’s a cost. We’re trying to reduce cost,” will have a problem with it. They think that, “Oh my gosh, right now,” and we know a number of very Fortune 100 companies, they make millions of dollars off the back of their employees not using the PTO and it being forfeited. And they actually budget for this.

William Tincup: 15:31 Stark.

Rob Whalen: 15:32 And what I find is interesting William, is that when you dive into the details, it’s the rank and file. It’s the rank and file that these dollars are coming from. One of the companies, it’s their call centers. And we were like, “Hold on. You’re making $18 million off the back of your call centers. These people don’t make much money. They can barely afford an emergency of $400. And you’re doing this to them for shareholders?” It was really enlightening to me that corporations were doing that.

Now, on the opposite end William, we have customers that take care of their employees and they look at this as … and they look at PTO as an earned wage. And their employees should own it. They should be able to do something with it. And they’re the ones that are coming to us and saying, “This is phenomenal. Now I can really start designing a benefits package around an already budgeted benefit that we accrue and allow my employees to utilize it to support them.” And those are the companies we work with.

William Tincup: 16:49 Well, and I think, those companies, innovative companies like that are thinking about retention. They’re thinking more longer-term. I think the companies that are thinking about how to actually make money off of PTO, it’s shortsighted. Right? That might work for a little while, but at one point you wake up and you’re like, “I don’t understand why we have a retention problem.” Well, it isn’t rocket science. Here’s one of the reasons that we have a retention problem. And in the case of, you said, like with call centers, this would be a wonderful way to retain people.

Rob Whalen: 17:25 It is.

William Tincup: 17:28 This is just … This isn’t … I mean, what I love about what you’ve built is again, there’s an elegance to it. And again, it’s a treatment of the earned wage. This is something. It’s not nebulous. It’s not invisible. If someone says it’s four weeks of this, that actually is money. Now, there’s an associated cost with that. Then again, you can do something with it or you can do something tangible with. I love it.

When prospects are talking to you, what questions should they be asking you in terms of because they might not … This is new to them. Maybe they have a PTO strategy. Maybe it’s an unlimited PTO or whatever, and you’re talking to them. What are the questions that you love hearing from prospects?

Rob Whalen: 18:21 Well, our prospects, when they come to us, first of all, we’re building a new category. This benefit that we’re providing is new. So they want to understand the regulations around it because there are regulations. We’ve spent-

William Tincup: 18:38 Right. Good point.

Rob Whalen: 18:39 A lot of time on understanding the regulatory environment because PTO is a deferred comp, right?

William Tincup: 18:48 Right.

Rob Whalen: 18:49 It sits on the books in a deferred modality. And so enable to use that, you need to understand how to use that so that you’re meeting and you’re compliant with all the IRS and labor law regulations.

We have a number of attorneys across the country that we work with and have worked with before we even delivered this to our first customer. Okay? We want to make sure that we’re compliant in all 50 states. I think that’s number one. Prospects come to us and they want to understand how we’re compliant, how does it work?

The next thing they want to know is, how do we do this in a cost-effective manner? And just so you know, my background’s in accounting. That was my major. I graduated in accounting. So I look at everything from a financial or a fiscal lens. And we work with CFOs and the CHROs in designing a benefit that is very cost-effective across the board and it allows our customers, we call it walk before you run, to implement our platform, maybe turn on two plans. So maybe you just want to turn on giving and sharing to start, okay? And get it out to your employees and so that the employees can now maybe take an hour of their time and give it to a non-profit instead of taking cash out of their pocket.

And then maybe later, next year, you want to turn on 401k or HSA, the ability to take some of your PTO value and put it into your 401k for retirement or your HSA, or maybe even pay down student loans. And you can turn that on. And then maybe the year after, maybe you want to do kind of an emergency cash out plan, which is the ability for your employees to cash out some of their PTO in case of an emergency.

Or we had a very large record company that we work with this year. They came to us. They wanted to allow their employees to cash out a certain amount of hours during the fourth quarter for Christmas, so that they could allow their employees to garner some more dollars to provide a better Christmas.

William Tincup: 21:17 Oh, cool.

Rob Whalen: 21:19 So all sorts of different ways that we can take our platform, turn on plans, we call them plans, and deliver a cultural type benefit that helps you support what you as an organization want to support. And that way you understand your cost and just what the expense is going to be over time. Okay?

William Tincup: 21:45 I absolutely love what you’ve built. Rob, it is both fascinating and I think really, really compelling for HR and benefits. And also again, as we look to kind of how we engage, how do we create a better workforce, how do we create a new way of work and retain talent, this is just another … It’s an arrow in a quiver. And it’s right there. I mean, what’s great about it, it’s even though you are creating a new category, time off is not something completely new to people. It’s just being the flexibility, giving people the flexibility, back to the employee, giving them the flexibility to do with it something creative. I love that. I love what you’ve built and I appreciate your time today.

Rob Whalen: 22:36 No, I appreciate your time, William. It’s been wonderful to take the time and spend with you today.

William Tincup: 22:41 Absolutely. Thanks for everyone listening to the Use Case Podcast. Until next time.

Announcer: 22:48 You’ve been listening to Recruiting Daily’s Use Case Podcast. Be sure to subscribe on your favorite platform and hit us up at recruitingdaily.com.

The Use Case Podcast

William Tincup

William is the President & Editor-at-Large of RecruitingDaily. At the intersection of HR and technology, he’s a writer, speaker, advisor, consultant, investor, storyteller & teacher. He's been writing about HR and Recruiting related issues for longer than he cares to disclose. William serves on the Board of Advisors / Board of Directors for 20+ HR technology startups. William is a graduate of the University of Alabama at Birmingham with a BA in Art History. He also earned an MA in American Indian Studies from the University of Arizona and an MBA from Case Western Reserve University.


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