Report: Mixed Signals Curb Use of Vacation Time

Management’s views vs. behavior on taking time off stymies vacation-taking

By Stephen Miller, CEBS Oct 20, 2016
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The uncertain vacation culture created by America's managers has led to $272 billion in accumulated vacation time sitting on the balance sheets of U.S. businesses this year, with private-sector vacation liability surging 21 percent in the last year.

The findings are noted in a new report, The High Price of Silence: Analyzing the Business Implications of an Under-Vacationed Workforce, from Project: Time Off, an initiative supported by organizations in tourism, hospitality and related industries.

Management's mixed messages contributed to 658 million unused vacation days in 2015, according to the findings, based on a survey fielded earlier this year among 5,641 American full-time workers with paid time off (including 1,184 respondents with managerial responsibilities and 312 executive and senior leaders), along with a review of 10-K financial statements.

"This is a $272 billion wake-up call for America's business leaders that they cannot afford to ignore vacation," said Project: Time Off senior director and report author Katie Denis. "Beyond the red mark on balance sheets, not taking time off hurts employee engagement and productivity, affects talent retention, and expedites burnout—all of which hurt a company's bottom line."

Beliefs vs. Actions

Despite the finding that an overwhelming majority (93 percent) of managers believe in the importance of time off, 59 percent reported leaving vacation time on the table, compared to slightly more than half of employees (53 percent).

Senior management was even less likely to use their time off, with fully two-thirds (67 percent) of executive and senior leaders leaving vacation unused last year.

Senior leaders below the C-suite level who don't plan and take vacation time can negatively influence company culture to a greater extent than higher-level executives who don't take vacation, as they interact with nonmanager employees more directly than the very top executives do, Denis suggested.

Employees' fear of returning to a mountain of work is a big factor that employers need to address if they want to stem the rise of unused vacation. This reason was cited by 55 percent of senior leaders as to why they didn't use their vacation time and by 33 percent of nonmanagerial workers.

Reasons for Not Taking Time Off

Nonmanagers

All Managers

Senior Leaders (senior vice president, vice president, director or managing director)

Executives (CEO, COO, CFO, CMO, CIO, president or owner)

Fear of returning to a mountain of work33%47%55%26%
Worry that no one else can do the work if they take time off27%37%52%34%
Feel it is harder to take time off as you grow in the company23%39%48%38%
Source: Project: Time Off.

As companies look for competitive advantages, increased consideration needs to be paid to underused vacation time and its impacts on the bottom line and beyond, advised Denis, who highlighted these benefits that occur when companies implement best practices around the use of vacation time:

  • Increased energy and less burnout. Managers said the most compelling reason for time off is to cut down on burnout. Brian Scudamore, CEO of home services firm O2E Brands, changed his vacation habits once he realized that the business suffers when he's feeling pushed to the limit—and how that trickles down.

  • Creativity. The majority (84 percent) of managers agreed that when employees take time off, they return to work with improved focus and creativity. The creators of Instagram, Dropbox and the musical Hamilton, as well as the architects of Starbucks' expansion as a national chain, were all inspired by thinking that occurred on vacation.

  • Talent development. When managers forgo vacation, it robs employees of the opportunity for increased responsibility and companies of the chance to see if their talent strategy is working. Deloitte Consulting CEO Jim Moffat believes that if leaders are unable to take vacation without checking in, it is symptomatic of larger problems in the firm.

  • Talent attraction and retention. Positive vacation cultures are key to attracting and retaining talent. Software firm FullContact, heralded for its $7,500 vacation incentive, reports nearly eliminating turnover since implementing the popular program.

"From the C-suite down, managers need to embrace the potential time off holds for themselves and their employees," Denis said. "Choosing to ignore vacation is choosing to fall behind companies that appreciate its power."

Another Approach to Unused Vacation Time

PTO Exchange is a recently launched platform that lets workers trade the cash value of their unused time off, Bloomberg reports. "With so much time going unused, we realized that this is a benefit that needs to be redefined," said Rob Whalen, who co-founded the Seattle-based startup. 

PTO Exchange allows companies to pay out cash for unused vacation time, removing those liabilities from their balance sheets. And it lets employees view online the dollar value of their untapped vacation time, which can then be used to book flights and lodging through a partnership with Priceline Group Inc., deposited into a 401(k) or health savings account, or donated to charitable organizations. 

But rather than providing an advantage for employees, wouldn't services such as PTO Exchange exacerbate the underlying problem by providing further incentives to not take vacations? Converting some time off to pay for travel could be a way for cash-strapped people to "have a good experience" instead of doing a low cost "staycation" at home, said Whalen, who stressed that taking time off is "hugely important."


(To learn more about managing vacation policies, see the Society for Human Resource Management's guide, How to Develop and Administer Paid Leave Programs.)

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