Whether a planned getaway or a day to unwind at home, time off plays an important role in keeping employees refreshed and productive. Despite providing paid time off (PTO) as an employee retention solution, your business may employ individuals who choose not to use their vacation or sick days. As an employer, this can create hidden challenges, from lower employee engagement to higher fraud risk. Our HR advisors offer a closer look at the problem and how your organization can respond.

Why Employees Skip PTO

The 2025 “FlexJobs Work and PTO Pressure Report” found that 23% of U.S. workers didn’t take any days off in the previous year. Other surveys have shown that most employees leave at least some PTO unused at the end of the year. 

According to the FlexJobs survey, most of these workers don’t take time off because they feel their workload is too heavy. In addition, some fear taking vacation time makes them look less committed to the job. 

The Impact on Your Business

When employees don’t take necessary breaks from work, morale can decline across your organization. In turn, your business is likely to suffer, as overworked staff are generally more stressed, less productive and more prone to making errors.

Failure to take time off is also a major red flag for occupational fraud. Employees engaged in fraud schemes typically decline vacations and time off for illness because they fear exposure if others fill in for them. 

For these reasons, our HR advisors recommend businesses consider requiring workers to take a minimum amount of PTO each year. If some of your workers always end the calendar year with unused PTO, you might also consider revising your plan to allow them to carry over a limited number of days. Just understand that large amounts of carried-over PTO can add liabilities to your balance sheet. Also, know that some states (including California and Montana) place significant restrictions on PTO forfeiture, which might require you to carry over all or some of your employees’ unused balances.

Ways to Encourage Time Off

An effective PTO strategy begins with a formal policy, but the real impact comes from how that documentation is put into practice. Organizations that succeed in getting employees to take time off also reinforce their policies with intentional procedures. To support your efforts, our HR advisory team offers some best practices and creative ideas: 

• Ensure supervisors have access to running PTO totals — possibly through your payroll management system — and encourage them to regularly remind their reports to schedule days off. 
• To appease workers who worry about their workload, ensure you have a solution in place for other employees or temporary workers to fill in. 
• Do what you can to assure staff that taking accrued time off won’t negatively affect their performance evaluations, keeping in mind that refreshed and energized employees will likely benefit your business. 
• Implement a wellness communications program in-house or engage a third-party provider to deliver content that encourages healthy PTO mentality.
• Establish a PTO contribution program, wherein employees with unused vacation hours can convert them to retirement plan contributions. A 401(k) plan can treat these amounts as pretax contributions similar to employee payroll deferrals, or treat the amounts as employer profit sharing. Keep in mind that this will require an amendment if your 401(k) plan doesn’t already include a PTO contribution arrangement. You also must continue to follow the plan document’s eligibility, vesting, rollover, distribution and loan terms.

HR Advisors, at Your Service

Doeren Mayhew’s HR advisors and consultants are well-versed in creating and administering tax-advantaged PTO contribution arrangements, evaluating time-off policies, uncovering the hidden costs of unused PTO and developing strategies that support both your workforce and your business goals.