In the United States, an average employee has over $3,000 in unused paid time off (PTO) at any given moment, with over $318 billion annually in unused PTO being rolled over each year, according to Veetahl Eilat-Raichel, co-founder and CEO at FinTech startup Sorbet.
“There’s a massive market failure around PTO and how it’s constructed in general, specifically given the fact that people are just not taking time off so there’s all of this unused paid time off that’s being accumulated,” Eilat-Raichel told PYMNTS in an interview, pointing to their in-house research findings.
It’s an integral part of their compensation package that is left sitting on the table each year, she pointed out, and although workers may be entitled to a payout of some or all of their unused PTO when they leave a company, the use-it-or-lose-it vacation policy some companies apply means some employees end up losing the benefit entirely.
That’s where the value of the on-demand PTO cash advance solution Sorbet offers comes into play, Eilat-Raichel said, enabling employees in the U.S. to access the cash value of their unused PTO at any point in time.
Currently available in eight states across the U.S., Sorbet’s proprietary technology uses machine learning and data from monthly pay slips to predict an employee’s ultimate PTO payout over a 24-month period. Once an application is approved, funds are loaded onto a prepaid card and ready to spend.
“Next thing that happens is that on a monthly basis, you start paying us interest only and the advance is then paid back when you ultimately leave your company. That’s when your employer will pay you and you repay Sorbet,” she explained further.
She added that their predictive model enables them to learn about behavioral changes and continuously update the actual balance over time, giving employees access to additional advances if they end up accruing more vacation time.
According to Eilat-Raichel, the on-demand PTO cash advance solution has been gaining traction across all industries, with increasing demand from frontline and blue-collar workers in sectors such as healthcare, education, retail, hospitality, manufacturing, and construction.
And as the company works to extend the new concept to every employee in America by January 2024, she said that being in a unique position where they hold a vast database indexed around PTO usage opens up a world of opportunities for the FinTech startup going forward.
“We’ve spoken to a lot of large HRM [Human resource management] companies and learned that while they do hold PTO data, they’ve never structured it or indexed it and they don’t really have any insights into behavior around PTO,” she noted.
Sorbet, on the other hand, can find correlations and predict trends around gender, age, seniority, geography and industry, among others, “uniquely able to assess a lot of trends around PTO usage that go beyond the financial value,” she noted.
Ultimately, she said, instead of dipping into their paychecks or taking predatory payday loans when budgets are tight, for example, millions of employees in the U.S. can take advantage of this overlooked financial benefit to supplement their income, especially during challenging economic times.
As Eilat-Raichel noted, more workers need to know that they “have this financial asset at their disposal, and it should be taken into account as part of their financial planning. And that in addition to their regular salary they have this additional asset from unused PTO which is accessible to them now because of Sorbet.”
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