March 4, 2015
$224 Billion Tied Up in Accumulated Vacation Time Across Private Sector
WASHINGTON—$224 billion in accumulated vacation time sits on American businesses' balance sheets, according to a new Project: Time Off report, “The Hidden Costs of Unused Leave: Balancing Employee Needs with Business Liabilities." This liability accrues annually when employees roll over unused paid time off and does not include sick or personal leave.
The analysis, conducted by Oxford Economics, found that U.S. companies carried forward $65.6 billion in accrued time off costs in just the last year. Further, the average cost of accrued time per employee is $1,898. For companies with more than 500 employees, the cost per employee is markedly higher at $2,609.
“Businesses need to pay attention to this significant and growing liability on their balance sheets,” said study author Adam Sacks of Oxford Economics. “Unused vacation time is a burden for American companies as well as the economy. Our previous research shows that if Americans took just one more day of vacation, it would amount to a $73 billion boon to the U.S. economy.”
Beyond the business implications, the intrinsic costs of unused vacation are equally important. When employees don’t use their time off, research shows it affects their happiness, health, and performance and productivity at work, all of which can undermine company success.
“The private sector’s vacation liability is nearly half the size of the national deficit, but it doesn’t have to be that way,” said Roger Dow, President and CEO of the U.S. Travel Association. “Through regular communication and a clear policy, businesses can decrease their liability while increasing productivity and improving employee well-being: it’s the double bottom line.”
The report highlights three innovative approaches to time off policies that U.S. businesses are already implementing:
- Incentive Programs: Companies—including RAND Corporation, Full Contact, and Travelzoo—have chosen to offer incentives for employees to use their time off. While the incentive programs vary, the goals are similar: lowering vacation liability; improving the quality of life for employees; and attracting talent.
- Unlimited Vacation: Although discussed frequently, the Society for Human Resource Managers says less than two percent of firms offer unlimited vacation policies. Netflix, a pioneer in this space, implemented their unlimited vacation program in 2004; Virgin Group, Gilt Groupe, and MGM Resorts International implemented similar programs more recently.
- Minimum Vacation: To ensure employees take vacation under unlimited policies, some companies have coupled the policy with a minimum vacation requirement. Since implementing a two-week minimum four years ago, Hubspot’s revenues have more than quadrupled.
“I hope this research makes business leaders review their own vacation liability. But more importantly, it should inspire them to take a look at their own policies, culture, and communication around time off,” added Dow.
To determine the private sector vacation liability, Oxford Economics completed a review of 10K financial statements filed with the Securities and Exchange Commission by 114 public companies covering 377,000 private sector workers. The financial statements reported the total cash value of accrued paid vacation time and the number of employees for each firm. Oxford Economics used additional survey work to extrapolate the 10K analysis to the broader private sector economy. A detailed overview of the methodology is available here.
About Project: Time Off
Project: Time Off is an initiative to prove the personal, business, social, and economic benefits that taking earned time off can deliver. We aim to shift culture so that using personal time off is not considered frivolous, but essential to strengthening families and improving personal health; a business investment with proven returns and an economic necessity. Learn more at ProjectTimeOff.com.
Note: Project: Time Off recently released new research that updates some of the facts and figures in this resource. See how they’ve changed in our new report, The High Price of Silence.