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The Surprisingly High Cost of Unclaimed PTO in Canada and the United States

“Wow, you really need a vacation!”

HR Decision Makers recognize that look on an employee’s face when they’ve finally reached their breaking point.

There may have been signs along the way. Perhaps a shift in attitude or morale. A sudden increase in absenteeism. Noticeable changes in the level of employee engagement, productivity, and accuracy.

Performance indicators may have hinted at trouble on the horizon. But not always.

In some cases, overwhelming stress and burnout aren’t identified until it fully takes hold. By that time, it’s unmistakable. You can see it in their eyes – they’re done.

If left unchecked, stress can result in a level of exhaustion that even a short, rejuvenating vacation can’t take the edge off. By that time, it’s often too late.

“How long has it been?”

While salaried employee benefits generally include paid time off, no laws require an employee to take personal time off.

Consequently, when it comes to actually use PTO, statistics show that employees are often skipping their vacation days altogether. This is especially true where company culture is ambivalent or even discouraging about taking time off.

In fact, Canadians leave 31 million paid vacation days unclaimed each year. That number jumps to 430 million unclaimed vacation days in the United States.

One study from Glassdoor shows that the average U.S. employee receiving vacation/paid time off is only taking 54% of their eligible PTO in the past year. This means that employers are not only paying for unclaimed benefits but that employees are routinely missing these essential opportunities to rest and enjoy life outside of work.

Naturally, it’s an employer’s best interest to have a happy, motivated, and positively challenged staff. Not to mention healthy, energized, and rejuvenated.

Unfortunately, neglecting to take enough personal time away from work can contribute to serious consequences in terms of stress.

And stress comes with a high cost for employers.

Calculating the Rising Cost of Stress

To understand the dollar value behind an employee on vacation, it’s helpful to first understand the dollar value behind an employee who’s ready to call it quits – or in the process of getting there.

Studies indicate that 47% of working Canadians consider work to be the most stressful part of their daily lives. In fact, a Monster Canada survey showed that 1 in 4 Canadians have quit their jobs due to overwhelming stress.

Furthermore, Forbes Magazine always states that in the US over half of HR leaders attribute 50% of their turnover cost to employee burnout

For employers and HR professionals concerned with creating a healthy workplace, it all comes down to understanding (and mitigating) the cost of stress.

And financially speaking, that’s no small figure. Workplace stress is estimated to cost Canadian employers $22 billion a year.

According to, as many as one million people per day miss work because of stress. A workplace psychology study also suggested that all of this translates into a loss of anywhere from $150 billion to $300 billion annually for U.S. Employers.

So where do these staggering expenses come from?

👉 Absenteeism

When workplace culture does not place a value on vacation time and paid time off, unplanned absenteeism can sneakily take its place.

The average direct cost of absenteeism is $3,550 per employee per year, according to Watson Wyatt Canadian Staying @ Work Survey.

In the U.S., as many as 10% of employees missing work because of job stress may be off the job for 21 days or more a month.

Companies are now beginning to recognize that employee well-being is an essential business consideration.

👉 Health Costs

Stress is insidious. Increased production of the stress hormone cortisol is responsible for a wide range of health issues.

Physical symptoms can manifest as anything from mild to severe aches and pains, migraines, gastrointestinal problems, adrenal and thyroid dysfunction, high cholesterol, chronic fatigue – just to name a few.

Stress also wreaks havoc on an emotional level. Anger, depression, and anxiety resulting from stress can break down relationships within the workplace. In teams, stress can spread from person to person, sometimes poisoning the whole environment.

The effects of ongoing on-the-job stress are cumulative, growing more disruptive over time.

Sadly, this type of influence can contribute to the development of serious emotional and psychological issues.

According to the Mental Health Commission of Canada, 500,000 Canadians miss work because of a psychological health issue every week. Employers are now realizing that the old-school “leave your problems at the door” approach to stress management doesn’t actually work. For employees working long hours and with an ever-increasing workload, stress can become a constant companion.

Lifestyle-related health issues rooted in chronic stress are rapidly increasing. The resulting need for increased health services can place a serious strain on employer-paid benefit programs.

And the cost? In the United States, annual health care services relating to on-the-job stress total $46 billion. The individual cost per employee is an average of 46% higher for those who report feeling stressed out vs. those who do not.

👉 Turnover

Is workplace stress bad enough to make even high performing employees want to quit? Research indicates a resounding “yes”, showing that 42% of employees have actually changed jobs due to stress.

Hiring managers know that high turnover spells bad news for the company budget. The process of recruiting, interviewing, and training plus lost opportunity cost means that it’s far cheaper to keep a happy employee than hire a new replacement.

For example, mid-range salary positions cost about 20% of their annual salary to replace. So the cost to replace a $40k manager would be $8,000.

For lower-paying positions (under $30,000 per year), the average new hire will cost about 16% of their annual salary or about $3,328 for an employee making 30k.

Correlating Stress and Productivity

A university research team conducted tests to determine if happier employees actually work harder. Their research showed that in fact, happy and satisfied employees are up to 12% more productive during work.

Long hours (over 48 per week) were also linked to decreased productivity and, unsurprisingly, higher incidence of work stress and job dissatisfaction. This is such a big problem that companies are beginning to take notice.

Although absenteeism has been studied more thoroughly, presenteeism is now being recognized as a serious concern for employers.

Presenteeism occurs when employees “power through”, turning up for work despite legitimate factors such as illness, injury, or other conditions that prevent them from performing as well as they could.

This means mistakes and accidents become more frequent, work becomes less efficient, and staff become increasingly disengaged.

Consequently, a workforce suffering the effects of stress and burnout carries huge costs in lost productivity. According to Forbes, these costs ring to the tune of $150 billion in the U.S.

Adding it up – the Bottom Line

On any given day, an estimated 100 million employees will miss work due to stress.

This infographic shows that health care and absenteeism costs associated with workplace stress total a whopping $300 billion annually. The average cost of one lost workday is about $602 per employee.

Recognizing these trends, employers are now proactively re-evaluating their role in promoting a healthy work culture. As new research continues to demonstrate the correlations between stress and lost productivity, the financial consequences are becoming more clear.

The bottom line for employers: Stress and burnout create a financial burden which far outweighs the cost of paid time off.

Companies are using this information to innovate their systems and establish a positive work culture where personal time off is supported and encouraged.

The Good News – PTO Pays Off

More than ever, employers are realizing that offering “more vacation” doesn’t necessarily equate to “more money spent”. Conversely, where company culture is ambivalent towards PTO, the creeping costs of stress and burnout are silently taking their toll.

It’s an easy conclusion: Happy, healthy, and well-adjusted employees are an invaluable asset to their organization. The new emphasis on work/life balance acknowledges the impact of stress, both on the company and the employee.

Understanding the correlation between stress and productivity, employers are beginning to treat time off as less of an obligatory policy to implement to their teams, but rather an opportunity to deliver an incredible internal experience.

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Companies that support employee satisfaction and promote employer-paid vacation are taking an active role to create sustainable productivity in the workplace.

The result? Engagement goes up, bringing morale along with it. Retention becomes less of an issue, and work output increases with productivity.

There’s an added bonus here, too:

Having a great company culture means it becomes easier to attract great talent.

“Why don’t you take some time off?”

Excellent question! One employers should be asking more often.

Cumulative stress, overwork, and lack of work/life balance are the silent killers of work ethic and positive company culture. For companies fighting against frequent absenteeism, rising health costs, and high turnover – unclaimed vacation time can serve as an internal red flag.

These days, employees don’t just want their employer to support their work/life balance – they expect it.  A study by Glassdoor indicates 85% of employees and job seekers expect support from their employer to balance their work and personal commitments.

Luckily, one solution is as simple as encouraging employees to take their vacation and enjoy time outside of work. Promoting PTO is a policy of care and appreciation which is easy to implement.

More tangibly, it just makes good fiscal sense.

After all, while happiness may be priceless, stress is not. In North America, the price tag on stress and burnout costs businesses billions of dollars annually.

Now, employers and HR professionals are changing the way we look at PTO.

Unlike stress, (which has no measurable ROI) paid time off is an essential support to employee well-being which also attracts, retains, and satisfies the top talent in any industry.

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Jared Goodman

As Content Coordinator at PurelyHR, it’s Jared’s job to research the latest and greatest time off trends and deliver them in impactful ways to our customers. A self-proclaimed Anti-Hustler, Jared knows the value time off can have in a business, having burned out several times as a freelancer before finding true work/life balance at PurelyHR. It’s his mission to help all 100,000 of our users achieve that same satisfaction.