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How Unused Vacation Days Impact Your Bottom Line

How Unused Vacation Days Impact Your Bottom Line

According to CNN Travel, 768 million vacation days went unused in 2019—a new record. 

At surface level, employees electing to work over taking time off may seem like a promising trend. However, a deeper look indicates that when employees forgo vacation days, both the worker and the bottom line suffer. 


Unused Time Off Can Cause Financial Liability

Vacation days are a grossly underutilized benefit in the American economy. When vacation days 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 vacation days rollover, the employer incurs financial liability, or responsibility to pay that employee for the unused vacation days. This typically doesn’t happen until the employee has left the company—which means that the employer has a balance that cannot be paid until the vacation day is used or the employee leaves the company.

By implementing a PTO policy that encourages employees to take vacation days, an employer can reduce financial liability (and avoid costly payouts).


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 wellbeing of employee which, as a result, increases productivity.

Not only does vacation reduce stress, it also increases creativity. In fact, 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 work. 


More Vacation Improves Team Morale

Close-working teams can impact one another's moods in the office or at the worksite. This phenomenon known as emotional contagion—and it's a common obstacle that mangers face. When one employee is overworked and stressed, they are likely to make other employees feel overworked and stressed.

  • 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.

When employees have time to refresh, the emotional contagion is positively impacted—it can actually boost employee morale throughout the entire office! So, when an employee feels relaxed and confident, they're likely to make others feel relaxed and confident. Cumulatively, this now relaxed and confident workforce can perform to the best of its ability.

Prolonged periods of diminished morale can also lead to high turnover among workers. Likewise, higher turnover means the company is spending more time recruiting candidates, which is both costly and can result in even lower morale, as the remaining employees are tasked with picking up the slack.  


Consider a PTO Audit to Alleviate Unused Vacation Woes

A PTO audit is an essential part of ongoing HR compliance. In some cases, conducting a time off policy audit may require a few small adjustments to accommodate an organization’s workforce. In others, such as the 2020 COVID-19 pandemic, a PTO review could save your organization from financial ruin. 

Recently, unlimited PTO packages have grown in popularity among employers as a tool to retain and attract employees. While this approach may seem especially generous, these policies can increase work trust and performance, avoid an end-of-year rush, and save your organization time, energy, and money in the long run.

Regardless, it's worth your time and energy to review your current time-off benefit to see if changes need to be made. 

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