The common workplace practice that’s costing employers billions

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Having diligent, hardworking employees is every employer’s dream, but it can come at a cost. Studies have shown that employees who sacrifice their vacation time to maintain their work flow could be costing an employer more than it would to have one or two employees out of the office for a couple of weeks’ vacation time.

According to the U.S. Travel Association, employees who choose not to use their paid time off could potentially cost an employer close to $52.4 billion annually due to lost revenue, employee termination or resignation, and hiring and training replacements.

Tricia Sciortino, president of eaHELP, says part of the reason employees are not taking their paid time off is due to fear of being away from their team and allowing work to pile up while they are away.

“When you look at a manager or someone in a leader capacity, we run into situations where managers don’t want to be out of the office or away from the team because they feel like they need to be available,” Sciortino says. “Some people who are not in a leadership position may be the only one who does a certain task, so they know if they are not there then the work is not going to get done.”

To combat this problem, employers need to train employees to be backups for other employees who are responsible for a specific task in the event that person is out of the office for a period of time, she says.

“From an employer’s perspective, we want our teams to take PTO, because turnover is costly,” Sciortino says. “You can lose employees because they are feeling burnt, and obviously rehiring and retraining people for positions frequently can be costly on their organization.”

Another costly issue employers face when employees do not use their vacation time is paying out that unused time. Claire Bissot, managing director for CBIZ, says she is against any employer that allows employees to be paid out for not using their vacation time at the end of the year.

A negative view
“If you think about it, [the employer] is paying [the employee’s] full salary for all of the days they worked, and then they are getting a bonus by not getting a vacation,” Bissot says. “This causes two things to happen: It causes the company to have additional financial debt and it also causes a negative view of the company.”

To clarify the second point, Bissot says if an employer does not force an employee to use their vacation by the end of the year, employees are going to begin to feel burnt out, as Sciortino also mentioned.

“Maybe [an employee’s] financial situation doesn’t allow them to go to the Caribbean or to Disney,” Bissot says. “Vacation use to them could be, ‘Why would I use [vacation] to just sit at home, when I can cash it out?’”

As for small businesses that may require employees to work at the company for a year before receiving vacation time, Bissot says that is a sign of poor leadership or poor business practice.

“There is no way [an employer] can’t afford vacation,” Bissot says. “If [an employer] can’t afford vacation, it better you and your wife starting up a business, or something like that where [a family member] is the only employee.”

Bissot added that companies that require employees to work at least a year before receiving PTO is a sign of high turnover and recommends that, depending on the state laws, employers should set a smaller accrual and not allow payout of vacation, should the employee quit within the first year of employment.

Another recommendation to help employers reduce that $52.4 billion number is to allow a partial rollover of vacation time, which means in the event an employee does not use their vacation time by the end of the year, part of their earned vacation time can be rolled over into the next fiscal year.

Vacation time is such an important part of maintaining a high functioning business, companies may begin to include vacation time into wellness programs, allowing additional vacation time as an incentive for employees to maintain a healthier lifestyle, she says. “I think vacation should absolutely be a part of a wellness program, assuming it is within the parameters of legal requirements,” Bissot says. “It is a key fighter to a lot of the stuff that causes medical claims for companies.”

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