PTO is Broken in America

Ah, the mythical vacation. Something we all dream about, yearn for, but alas something most of us rarely see. It shouldn’t surprise you to know that the United States has seen a steep decline in paid time off (PTO) utilization since the turn of the century. According to a recent study by Project: Time Off, 52% of Americans did not use all of their PTO in 2017, leaving a total of 705 million vacation days unused. Of these days, employees forfeited 212 million days, which is equivalent to $62.2 billion in lost benefits.

While we all know the implications of not taking time off on employees at an individual and even at a group level - burnout and increased turnover, what most of us don’t realize and what seems almost counterintuitive is the financial impact on the company itself. When employees don’t use their PTO, it often sits on the books as a liability, as a cost that needs to be paid out once those employees leave the company.

Whether you’re still reading because you care about the well-being of your employees or because you care about your company’s bottom line, PTO is broken and fixing it is in everyone’s best interest.

Unfortunately, despite the downward trend in PTO utilization, the system remains stagnant. For reference, the United States is the only country in the Organization for Economic Co-operation and Development—a group of 37 countries that work to stimulate economies and world trade—that does not mandate paid vacation. One might argue that the introduction of unlimited/flex PTO in recent years was progressive, but in many cases, unlimited PTO actually leads to less days being taken and further exacerbates the burnout crisis. There's a much deeper problem that needs to be addressed first for any PTO policy to be successful - a stigma that is uniquely embedded in American culture.

Where does this stigma stem from? Most leaders recognize the benefits that PTO can have on business. We invest an average of $7,702 per employee annually in PTO because it's good for business. Research consistently shows the health benefits of taking vacation time, such as improved productivity, lower stress, and better mental health. A majority of managers are on-board with the research as well, believing that PTO usage is important for maintaining team energy levels (80%); giving employees better attitudes (74%); and making employees more productive (67%).

The problem is that we fail to communicate this supportive message to employees. No matter the policy that you've implemented - standard accrual with rollover, "use it or lose it", unlimited/flex - odds are you've overlooked the importance of communication when it comes to PTO and your employees have taken notice. Nearly two-thirds (65%) of employees report that they hear nothing, mixed messages, or discouraging messages about taking time off. 58% report a direct lack of support from their boss for taking time off and 53% even report a lack of support from their colleagues. The culture of silence has clearly created a vacuum where negative perceptions thrive.

The good news is that it doesn't take much to turn things around. All it takes is a little communication, a little effort to keep vacation time top of mind throughout the year and remind employees that it's good thing to unplug from work once in awhile. Matt Straz, Founder and CEO of Namely, suggests that leaders should openly "talk to employees about the benefits of taking time off" and "remind them why days off are important and emphasize that taking them won’t hurt their reputation around the office." It's not enough to just implement a good PTO policy and assume employees will know what to do with it. You have to follow through and educate employees on how to interpret that policy. Doing so will not only help you maintain a well-rested and productive workforce, it will keep your employees around longer.

In the same study by Project: Time Off, researchers found that employees who reported that their company encourages vacation (68%) are much happier with their jobs than those who work at places where either vacation is discouraged or managers are ambivalent about taking time off (42%). They are also more likely to use all of the PTO that they’ve been given (77% compared with 51%). Some companies are latching onto this idea, finding cool new ways to encourage and incentivize employee PTO usage.

For example, Bart Lorang, CEO and co-founder of Denver-based software company FullContact Inc., pays his 325 employees to take a vacation. Workers receive $7,500 annually after one year of employment, provided they use the funds for a vacation and agree not to connect to work while they’re off. “The idea for the policy came from my own personal experience with going on vacation,” Lorang says. “I’ve seen people [who] take advantage of the policy come back recharged and focused, which makes for very happy, productive employees.”

Whatever methodology you choose, we need to start tackling this problem at the root. We've spent so much time trying to find the next cool benefit to offer our employees - yoga classes, shuttles, tuition assistance - that we've forgotten to nurture our foundation. PTO is the cornerstone of work-life balance in this country and it's time we start treating it that way.

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About Kevin Corliss

Kevin is a bad mamma jamma who, just now, used the phrase mamma jamma for the first time in his life. He clearly loves trying new things, especially starting companies and traveling.