Highlights:
- Sorbet raises $6M seed led by Viola Ventures to tackle the thorny financials of paid time off.
- Investors also involved in Seed funding spherically led by Viola Ventures, with participation by World Founders Capital, Meron Capital.
- According to Sorbet in the U.S., employees use only 72% of PTO balances.
Introduction:
A U.S./Israeli startup, Sorbet — which is tackling what companies do with the financial risks as employees accrue paid time off (PTO) — has raised $6 million in a seed funding round led by Viola Ventures, with participation by Global Founders Capital and Meron Capital.
The economics of paid time off is relatively hidden in the business world, but essentially, Sorbet takes on the burden of this PTO from employers and then allows employees to spend it. This gives the employers far more control over the whole process and the ability to forecast its impact on the business.
Sorbet says that in the U.S., employees use only 72% of PTO balances, even though it’s the most sought-after benefit. But this, effectively, comes out at 768 million unused days off a year, worth around $224 billion. This creates a difficult problem for CFOs and accountants because its creates balance sheet liabilities on the company’s books, says Sorbet. If the employee doesn’t use all of their PTO.
Sorbet buys out these PTO liabilities from employees, then loads the cash value of the PTO.
Sorbet buys out these PTO liabilities from employees, then loads the cash value of the PTO on prepaid credit cards for the employees.
Speaking to me on a call, CEO and co-founder Veetahl Eilat-Raichel, said: “We researched this whole idea of paid time off and found this huge, massive market failure and inefficiency around the way that PTO is constructed. It’s kind of one of those things where, on the face of it, there’s this boring bureaucratic payroll item that turns into a boring balance sheet item.
But under it is a $224 billion problem for U.S. businesses… If you think about it, employers are borrowing money from their employees at the worst terms possible and employees aren’t benefitting either. So everyone’s hurting here.”
Statement from CEO and Co-founder Veetahl Eilat-Raichel:
She said: “Sorbet assumes the liability on ourselves. So then we can allow the company to control their cash flow. They can decide when they want to pay us back. They gain a lot of financial value because we are able to be very, very attractive on our funding. So it saves costs, it provides them with complete control of their cash flow and it allows them to give out amazing financial benefits to employees at a time where we can all use some extra cash right now.”
The platform Sorbet has built will sync with calendars, HR and payroll systems, identify habits. It will then proactively suggest personalized, pre-approved:
- 3-6 hour “Micro Breaks”
- 1-4 day “Micro Vacations” and
- +1 week Vacations.
This, says the startup, increases PTO used by as much as 15%.
