Use it or lose it: PTO policies need a refresh

Employees need a break — and they feel they need their employer’s approval to take one. 

During COVID, employees left 33% of their vacation days unused, and 92% canceled a vacation they had planned, according to the U.S. Travel Association. Even pre-pandemic, nearly 768 million days of vacation time went unused. While travel opportunities are opening back up, employees are still cautious about hitting the road: 30% say they are foregoing vacation this year, according to personal finance site Nerdwallet. 

But all work and no play is a recipe for burnout, says Chris Goldsmith, VP and senior consultant at HR and benefits consultancy Segal. Employers need to encourage employees to take their time off if they want to manage retention rates and support employee mental health. 

Read more: How to get employees to take their PTO

“Clearly there are some advantages in relieving stress and burnout by taking vacation and getting away,” Goldsmith says. “It’s really important to take longer breaks to create a memorable experience with family or loved ones. Longer breaks really help out a great deal with retention and attraction, and have a lot of mental health benefits.” 

Goldsmith says one way employers are encouraging PTO is to institute a minimum requirement for time off. Not only does this arrangement ensure employees are taking their time to reset and refresh, but it can save an employer money if that employee potentially moves onto another job or retires. 

“Roughly two-thirds of employers in the U.S. have paid time off arrangements, and when people terminate, an employer has to pay out the balance,” he says. “When you combine the Great Resignation and the costs of turnover and retraining, and then you have to pay out this vacation liability, it’s like salt in the wound.” 

Read more: To beat burnout, this company offers workers 2 weeks of PTO

Another way to mitigate these financial pitfalls is through an unlimited policy. But while it may be beneficial for an employer’s bottom line, data from HR software platform Namely found that employees take just 13 days off when they have unlimited PTO. Employers still need to encourage time off as a way to support the health and wellness of their workers. 

“When you move to an unlimited vacation arrangement, you essentially wipe out the entire liability,” Goldsmith says. “But when people have unlimited vacation, they actually take less vacation. So there has to be trust with the company leadership and employees, otherwise there can be a breakdown from an employee relations perspective.” 

Some employees may take advantage of unlimited PTO, while others take no time off at all, Goldsmith says. Managers and HR need to have clear boundaries and check in with employees so vacation time is still meted out fairly.

Read more: Don't make PTO a punishment: 4 things employers should know

While unlimited PTO may seem like the easiest choice, Goldsmith says it’s more beneficial for both sides if time off is categorized and structured — offering leave policies for parents and caregivers, sick time, vacation and bereavement shows employees their company is considering their lives outside of work. Employees may be more willing to use time off if they have a specific reason to do so. 

“I think it's far better to have a combination of leave arrangements that respond to different types of needs,” Goldsmith says. “Cause-specific arrangements attract people to the workforce. They attract new hires, and they're really helpful in terms of retention. It’s this belief that my employer is a great employer to work for because they really care for people in times of need.”