Have you ever suddenly realized that it’s already October and you still have two weeks of vacation time to burn through? Millions of employees have had the same realization, and this year is no exception. With the end of the year quickly approaching, many employees are scrambling to avoid a PTO cliff. This is because their companies have cutthroat “use it or lose it” PTO policies that force employees to spend their time off by December 31. If they fail to do so, this crucial benefit simply evaporates with no refund, rollover, or payout.
PTO is widely underused, so any policy which requires employees to take time off by a certain date can feel more like a punishment than a benefit. There are many reasons employees avoid taking all the PTO they have earned, from anxiety about creating work for colleagues to heavy workloads they know they will stress about while on vacation. Instead of forcing employees to make these uncomfortable decisions, HR teams should engage with them about their concerns and work with them to ensure they’re getting the full value of benefits they deserve. And the last thing they should do is respond to these concerns with: “Not my problem. Use it or lose it.”
Why PTO Under-Usage is a Growing Problem
There’s a crisis among American workers: the overwhelming majority fail to take all their PTO, even though a comparable proportion say they would like to do so. This has serious negative consequences for companies and employees alike: in states that require employers to pay out the full value of unused PTO, the failure to take time off creates huge unfunded liabilities. Meanwhile, when employers are allowed to have “use it or lose it” policies, this means employees who don’t take all their time off forfeit the value of a major benefit. While this can reduce what employers owe, it leads to stress, burnout, and resentment among employees.
A 2025 survey found that nearly a quarter of American workers didn’t take a single day off over the preceding year. At a time when 40 percent of employees say they feel stress for a lot of the day, this tendency to overwork can have immensely harmful consequences for morale and productivity. It can lead to burnout and even turnover. Among employees who did take time off, most left PTO on the table and just 35 percent took more than two weeks.
It’s no wonder that 85 percent of employees say “America has a culture that glorifies being busy.” While Americans take an average of 12 days off per year, this number jumps to 31 days in France, 29 days in Germany, and 27 days in the UK. It’s time for HR teams to address this culture of overwork and ensure that employees are getting the full value of their time off.
Employees Often Convince Themselves Not to Take Time Off
While most employees wish they could take more PTO, they impose hard limits on themselves. Pew reports that there are several reasons employees leave time on the table: concerns that they will fall behind, leave colleagues with more work, reduce their chances at advancement, and even lose their jobs. Employees also report that they feel pressure to always be responsive to work demands, and a significant majority say they would respond to work messages, check email, or respond to work requests outside regular hours.
At a time when 55 percent of employees report feelings of burnout at work, the culture of overwork and PTO under-utilization needs to change. Some companies believe they have solved this problem with unlimited PTO, but this isn’t the case. Employees know there’s no such thing as truly “unlimited” time off, so such a scheme can actually intensify the pressure to leave PTO on the table. Workers don’t want to create the impression that they’re abusing the benefit, which is why they sometimes take even less time off under “unlimited” PTO plans. The reluctance to take all the time employees are owed is extremely costly: we estimate that employees give up $85-$95 billion in earned PTO each year. The average value of this relinquished time off is around $3,000 per employee.
HR teams must discard restrictive use-it-or-lose-it policies and look beyond gimmicks like unlimited PTO. As employees around the country sprint to use their PTO before the cutoff at the end of the year, it’s time for HR teams to explore a new path.
Avoiding the Year-end Cliff
The PTO status quo is a strange situation. It isn’t good for employees who are losing thousands of dollars of PTO or forcing themselves to take time off all at once to avoid this outcome, even if doing so stresses them out. It isn’t good for employers, many of which have accrued significant balance sheet liabilities in states where they are required to pay out the full value of unused PTO upon employee separation. We calculate that the total unfunded balance sheet liability is over $760 Billion. High levels of employee stress and burnout are problems PTO should help to mitigate, but in too many cases it is actually making those problems even worse.
HR teams can overturn this dysfunctional status quo by providing employees with greater flexibility in how they use their time off. Instead of forcing onerous use-it-or-lose-it policies on employees, HR teams can allow them to allocate the value of their PTO to other priorities: 401(k) contributions, HSAs, 529 accounts, student loan payments, or even cash. According to a recent Morgan Stanley survey, 85 percent of employees would be more likely to stay at companies that offer financial benefits which meet their specific needs. The billions of dollars in unused PTO that are going to waste year after year could be redirected toward such benefits.
Rather than pressuring employees to use their PTO or lose it, HR teams should encourage them to use it in whatever way makes the most sense. This will help employees get the most out of a core benefit, reduce stress and burnout, and finally turn workforces away from the year-end PTO cliff.