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How Unused Vacation Days Affect The Bottom Line

How Unused Vacation Days Affect The Bottom Line

While prior to the pandemic, only about half of all vacation days were used, employees now risk losing billions of dollars worth of unused vacation time and benefits if they are ineligible for rollover. On the surface, it may seem like a promising trend for employees to choose work over PTO, however, upon deeper investigation we see that when employees forgo vacation days, they see both their work and productivity suffer.



How Was PTO Affected in 2020?

According to a working paper published by the National Bureau of Economic Research, the average American working day was nearly one hour longer in 2020. Despite this elongation, United States workers were also taking less vacations. Due to the inability to travel and perhaps to the hopes of traveling down the road, vacations were being put on the back burner. 

According to a survey by CNBC, 92% of those surveyed claimed that they either “shortened, postponed or canceled their planned time off.” 62% went on to say that they spent less on vacation due to the pandemic while 49% said they would reconsider vacation time if they were to receive another stimulus check.


How the Shift to Remote Work Affects PTO Usage

With many full-time employees spending the majority of these last two years working from home, we have seen a shift in vacation and paid time off (PTO) usage. As employees spend more time working out of their homes, the line between work and personal time grows ever more gray. 

It becomes very difficult for employees to distinguish their work from their home life when they are moving so close together. Employees are now less likely to use their PTO. The struggle to find a good work life balance can put a damper on vacation plans. That blur has to become more defined, and employers need to find ways to encourage workers to take their vacation days. 


Unused Time Off Can Cause Financial Liability

Vacation days are a grossly underutilized benefit in the American economy, and when they are lost, the employee also loses a valuable part of their benefits package that can't be recovered or replaced. Essentially, the employee is losing value by forfeiting this time off.

When an organization has a PTO policy that does not rollover year over year, many employees will save up their PTO for the holidays. This can mean having a large percentage of employees taking vacation in quarter 4, which is often the busiest time of the year. 

By implementing a PTO policy that encourages employees to take vacation days, an employer can reduce financial liability, while keeping their employees refreshed throughout the year.


Time Off Drives Productivity and Creativity

Vacation utilization can also support employee productivity and even creativity. By taking a break from the office, employees temporarily separate from workplace pressures and decrease stress levels. This "stress detox" benefits the physical and mental well being of employees, which increases productivity.

According to an article published by Psychology Today, "Brain imaging studies show that doing nothing, being idle, daydreaming, and relaxing create alpha waves in the brain that are key to creative insights and innovative breakthroughs." This finding counters the common misconception that working longer accomplishes more.

By breaking up the constant 9-to-5 grind, employees become more efficient in the time they do work. 


More Vacation Improves Team Morale

Working closely together, team members can have a great impact on each other’s moods. This is thanks to a phenomenon known as emotional contagion. This phenomenon is a common obstacle that managers face in the workplace. If there is one employee who is overworked or stressed, those employees who work closely with them may take on an air of stress as well. 

For example: DeShaun has a deadline approaching for a project. This particular project is a group presentation—which is out of DeShaun's comfort zone. When DeShaun meets with his team to review the final project, he continually brings up things that could go wrong in the presentation. His teammates, responding to DeShaun's stress, become less certain and become stressed as well.

Prolonged periods of diminished morale can lead to high turnover among workers. Higher turnover means the company is spending more time recruiting candidates—which is both costly and harmful to morale—while the remaining employees are tasked with picking up the slack.

However, when employees receive time to refresh, emotional contagion can be a positive influence—it can actually boost employee morale throughout the entire office. If an employee is feeling relaxed and confident, they are likely to impact their team in a positive way. 


How Can Employers Combat Unused Vacation Days?

Employers can utilize a PTO audit to create new policies that would help to eliminate unused vacation days. By offering unlimited PTO packages you give the employees the option to take vacation days as needed while not fearing the loss of those days come the end of the year. Many times employees will choose to use days at more convenient times as well if there is no fear of losing them. 

Another way to combat unused vacation days is to use an accrual system, which is a system that allows employees to accrue vacation days based on the hours they work. This is a great way of rewarding loyal team members, and increasing work trust and performance. When employees are able to rollover their vacation and accrue their days, they are more likely to spread those days out, and worry less about losing out on those days. 

Regardless of your circumstances, it is certainly worth your time and energy to review your current time-off benefits to see if changes need to be made.

BernieU Course: Paid Time Off Tutorial: How to Build and Audit a Great PTO Policy

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