Employee Vacations Are Good for Business

Employees aren’t the only ones who can benefit from taking a vacation. Businesses that urge workers to take time off to relax, recuperate and recharge typically have lower health care, workers’ compensation and turnover costs, and they benefit from higher productivity and employee engagement levels.

The problem is that most U.S. workers don’t take full advantage of their paid-time-off benefits, and the negative effects of overworked and burned-out employees can kick businesses right in their bottom line.

“Everyone agrees that taking vacation time is a good thing, and many business owners understand that rested and happy employees are more productive, healthy and innovative,” said Susan L. Harmansky, SPHR, vice president of human resources at Southern Graphics Systems in Louisville, Ky. “The reality, however, is the rapid pace of business and the need to have projects finished yesterday is keeping people from taking the time off that they need.”

According to Harmansky, human resource professionals have an important role to play in advocating that employees use their paid time off. The real trick is finding a way to fit vacations into busy work schedules.

“Following the recession, businesses are much leaner and doing more with less; so having one person from a five-member team take a week off can put pressure on others,” she said. “HR practitioners possess the skills and knowledge to help supervisors plan and distribute workloads so people can take time off without feeling any pressure or guilt.”

Pressure to be productive and worries about job security are keeping most U.S. workers from taking full advantage of their paid-time-off benefits. In the fall of 2012, Harris Interactive surveyed more than 2,000 users of the travel website Hotwire.com and found that Americans left an average of 9.2 paid vacation days on the table that year—an increase of three unused days from a 2011 survey.

The reasons typically revolved around job security and workload issues. Other research has revealed that even when U.S. workers take time off, they stay connected to work by responding to e-mails and phone calls.

Healthy Organizations

Although some might commend individuals who are so dedicated to their jobs that they forgo or work through vacation time, employers are finding that the benefits of having employees take time off far outweigh the advantages of keeping them at the office.

“Actively encouraging employees to take the time they need should be an integral part of any paid-time-off program,” said Steve Cyboran, vice president, consulting actuary and healthy enterprise initiative leader for Sibson Consulting in Chicago. “It really should be ingrained into an organization’s corporate culture.”

The paybacks to companies include enhanced innovation, improved productivity and reduced health care costs, Cyboran noted. Research by Sibson has shown that businesses with effective time-off policies tend to have much lower turnover costs and higher employee engagement levels.

“Some research shows that turnover costs can be reduced by as much as a third,” Cyboran said. “And when you factor in other cost reductions from lower incidents of stress-related illnesses and workers’ comp claims, the cost benefit of encouraging employees to take vacations can be fairly significant.”

And because accounting standards require employers to list vacation time owed as a liability on corporate balance sheets, any methods businesses can use to get employees to take paid time off will reduce that liability.

“So you can easily make a business case for encouraging employees to use their vacation time,” Cyboran pointed out. “Another important benefit is that it’s much easier to adjust workloads and plan for scheduled time off, instead of having to deal with all the challenges unscheduled leaves can create.”

Planning for Time Off

Sibson’s healthy-enterprise research also revealed that companies with policies urging workers to take vacations tend to have a lower number of unscheduled absences. This correlation isn’t lost on some organizations, which are now requiring employees to take a set number of vacation days off every year.

“We require that all employees—no exceptions—take five paid vacation days in a row,” said Connie Rank-Smith, SPHR, assistant vice president of total compensation and rewards at Vantage West Credit Union in Tucson, Ariz. “Our staff really likes the policy, and we take it very seriously here. We’ve seen a lot of benefits from requiring people to take the time off.”

Although planning and workload scheduling are one reason for the policy, Rank-Smith admits that the time-off policy allows her organization to check for errors or fraudulent transactions.

“As a financial institution, we must audit the work of all our associates, and any error or questionable transaction someone is trying to hide will most likely surface within a five-day business cycle,” she explained.

Since the policy has been implemented, her company has had lower turnover rates and improved employee attitudes.

“Feedback from employees has been very positive, and they are very appreciative of the time off,” Rank-Smith said. “And from an anecdotal standpoint, when people return from their vacations they are usually more energetic and engaged.”

A Boost to Camaraderie

Improvements in teamwork and employee camaraderie are benefits that most employers might not think about when urging workers to take time off. Yet, opportunities for cross-training and building stronger team ties should not be ignored, Cyboran advised.

“Some employers are building training and leadership development into their time-off policies,” he said. “It gives workers a chance to step into new roles and take on job duties that they normally wouldn’t.”

Southern Graphics’ Harmansky agrees. She said that pitching in and helping to lighten the load when co-workers take time off builds a stronger sense of community among employees. In addition, workers who take on new roles can bring new perspectives to the job. Harmansky recalled an individual who suggested a change to a work process that improved efficiency and reduced costs.

“It’s not that the employee who took the vacation was doing a bad job; the person who offered to fill in recognized that there was a different way to do it and remove a step that had become unnecessary,” she said.

Ways to Encourage

Good communication is key when encouraging employees to use their paid-time-off benefits. Often, businesses can send mixed signals—encouraging time off but supporting a culture that makes employees feel guilty about leaving supervisors and colleagues in the lurch.

“Support from upper-level management is crucial,” said Cyboran. “Business leaders have to demonstrate they are fully on board with taking time off.” He recommends training supervisors about an organization’s paid-time-off policies and how to manage and plan for scheduled absences.

“Often, supervisors just aren’t prepared on the best ways to manage and work around vacation schedules, and that can end up sending the wrong message and actually discourage workers from taking time off,” he said.

Limiting the balance of vacation time that employees can carry over from year to year (often called use-it-or-lose-it plans) is another way to encourage people to schedule days off. Some companies have policies that allow workers to cash out unused vacation time at the end of the year—but only after they take a certain number of days (typically, one or two full weeks).

“Encouraging workers to take the time they need should be at the core of any time-off policy,” Cyboran said. “Employers that build this into their culture will make a tremendous leap toward becoming a healthy enterprise.”

Bill Leonard is a senior writer for SHRM.