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The Price of Unused Vacation Time: $224 Billion


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Overall, Americans are taking less vacation than they did a decade ago. In 2013, the average worker took 16 vacation days, down from 20.9 in 2000, according to a previous analysis by the U.S. Travel Association’s Project: Time Off, an initiative to encourage more workplace vacation.

Americans are throwing away $52.4 billion every year because they won’t take time off from work.

That is one finding in recent research on vacation time conducted by Oxford Economics, an economic analysis firm. Not only does our collective reluctance to go on vacation result in burnout, it can also affect firms’ financial results, saddling U.S. businesses with $224 billion in liabilities for accumulated employee vacation time.

The liability doesn’t include sick or personal leave, but has been generated by years of workers’ rolling over unused paid time off, according to the researchers, who say the debt grew by $65.6 billion last year alone.

The study was commissioned by the U.S. Travel Association which, of course, has a vested interest in encouraging workers to take more vacation. To perform the analysis, Oxford Economics reviewed Securities and Exchange Commission filings for 114 public companies covering 377,000 private-sector workers. The statements reported the total cash value of accrued paid vacation time and the number of employees for each firm.

“This is not only not good for employees, it is not good for companies,” says study authorAdam Sacks, president of tourism economics at Oxford Economics.

Workers are “basically giving away their time for free,” he says. And for companies, burnt-out workforce can result in lower productivity and retention.  What’s more, those unspent vacation days “are still on their books in terms of a liability, which can be quite burdensome from a cash-flow standpoint.” That means that many companies must be prepared to pay out vacations if employees retire or leave, he says.

On average, businesses owe each employee $1,898 in accrued paid time off, and carry 5.7 days of accrued vacation per employee. For firms with more than 500 workers, the cost per employee is higher, at $2,609 per worker.

Most unused vacation days are carried over for future time off or payout when an employee leaves. About a third are simply lost, because of “use it or lose it” policies, or caps and expiration dates on banked vacation days, the report says. As a result, workers forfeit some $52.4 billion in earned benefits each year. Workers, on average, fail to use nearly five vacation days a year.

Firms have devised a number of ways to encourage employees to take their time off. 

Research firm Rand Corporation and software company FullContact Inc. both pay employees for taking vacations.  Rand pays eligible employees 3% of their monthly base salary, in addition to their regular pay, for each vacation day taken; if employees take all 20 vacation days during the year, they receive an additional 5% of annual salary, the firm says.  FullContact, meanwhile, offers an extra $7,500 stipend to take vacations. “You must be off the grid, no emails, no calling work, absolutely no work,” the company says on its career and benefits site.

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