Americans Not Taking Vacations Is a $224 Billion Problem for Employers

The Americans not using their vacation time end up eventually getting it anyways, or at least compensation for it, and a study found U.S. employers’ wallets could take a hit worth hundreds of billions of dollars because of this.

Skift conducted its own survey in January finding nearly 42% of Americans didn’t take a single vacation day in 2014, along with four other surveys from last year all spelling out many Americans don’t take enough vacation time for a variety of reasons such as age, sex or income level.

“Project: Time off,” a study done by Oxford Economics, a commercial venture of Oxford University’s business college, was commissioned by the U.S. Travel Association. The study points to some $224 billion as “vacation liability.”  U.S. companies must pay employees when they retire or leave the company for this unused vacation time or paid time off, and it sits on the balance sheets of U.S. companies.

Oxford Economics estimates U.S. employers’ accrued $65.6 billion of the $224 billion last year alone and the current amount employers owe the average employee for unused vacation time is around $1900.

This adds up to employees forfeiting nearly $52 billion a year in vacation benefits, which is bad news for booking sites, hotels, tour operators and other travel companies all wanting a piece of that pie. Even though a quarter of U.S. employees’ vacations days are “use them or lose them,” about 53% of them roll over year to year.

This means companies won’t eventually meet sudden financial doom because of the vacation drain. However, the payouts to employees will ensue over time like a dripping faucet, the study found.

“While it’s never a lump sum payment and will only be due in smaller quantities, it is something businesses have to account for and [the amount of money for vacation compensation they owe their employees] might surprise them,” said Cait DeBaun, a spokesperson for the U.S. Travel Association.

“Regardless of [a company’s vacation policy], regular communication is essential to encourage employees to use more of their vacation time. We found in previous research that most employees hear nothing from their employer about [vacations or paid time off], but we also found that employees said encouragement from their managers is the number one way to get them to use more time off.”

Companies That Care About Vacation

These statistics make it easier to forget some U.S. companies actually value employees’ rest and relaxation. Vacation policies at travel companies such as Travelzoo, Hyatt and MGM were examined for the study although total vacation liabilities weren’t broken down for different industries such as travel, finance or healthcare.

Travelzoo, a travel deals publisher, offers its employees an annual $1,500 vacation stipend and invested more than $5 million into employee vacations since 2008.

“By helping our employees take more vacations they’re better able to experience and understand the deals Travelzoo publishes,” said Justin Soffer, Travelzoo’s vice president of marketing. “It has certainly boosted employee morale.”

Virgin Group CEO Richard Branson announced in September every salaried employee of the company would receive unlimited vacation moving forward. The study found in practice this often makes employees more conservative with taking vacation due to uncertainty for how many vacation days they should take.

This is why HubSpot, a software and marketing company, also instituted an unlimited policy in 2010 which mandates employees take at least two weeks vacation each year. The company also reduced sales quotas twice a year to make this feasible and saw its total revenues grow from $15 million to more than $77 million as a result, according to the study.

“HubSpot established its unlimited vacation policy in an effort to allow employees to build their work around their life, not the other way around,” said Laura Moran, a spokesperson for HubSpot.

The study reviewed Form 10-K financial statements filed with the SEC by 114 public companies employing 377,000 private sector employees. The financial statements reported the total cash value of accrued paid vacation time and the number of employees working at each company.

Download (PDF, 1.17MB)