How Does PTO Affect Employee Productivity?

It may seem like restricting employee time-off would be beneficial to a business since it keeps workers in the office working more days of the year — but that is not usually the case. Not only does a generous PTO plan attract top talent, but it could also make employees more productive.

Several studies have shown that giving employees flexible time off of work results in greater employee retention, morale and, ultimately, production. Allowing your workers the freedom and control to take time when they need it helps you as an employer establish a culture of trust and engagement. When employees feel their company trusts and respects them, the feeling will likely be reciprocated. This, in turn, may lead employees to work harder while in the office because they care more about the company and its success.

Unlimited Vacation as an Option

According to a report from the Society for Human Resource Management, 75 percent of HR professionals surveyed said employees who take more vacation time perform better than those who use less personal time. For this reason, many large companies have instituted an “unlimited vacation” policy. These allow employees to take time when they need it without worrying about accrued time or PTO balances.

While this may sound like a situation that could easily backfire, real-life examples have shown it actually results in greater efficiency and more dedicated employees. For example, since Hubspot switched to an unlimited vacation policy a few years ago, it has become the No. 2 fastest-growing software company, according to the Inc. 500.

It may not be a direct correlation, but unlimited paid time-off puts a greater focus on outcomes, instead of input, which can lead to more efficient production.

Maximizing the Benefits of Paid Time-Off

Even if sticking to a standard PTO plan, there should be a level of flexibility, and employers should encourage employees to use their time. If use of time-off is not clearly supported by the company, workers may feel as if taking time gives the impression that they don’t want to work or don’t care about the business.

It also might make employees work through illness or burn out quickly, both of which can hinder production. According to a study by Project: Time Off, however, if employers openly encouraged their employees to use their time, 80 percent would take more of it.

In addition to encouraging time off, setting an expiration for PTO may provide an extra layer of incentive for employees to take time off every year. If workers know they will lose their time if they don’t use it (and it won’t just carry over to the next year), they may be more inclined to take it every year.

Although it may seem like having every employee in the office every workday of the year is what’s best for business, offering adequate time-off is crucial and can have a serious affect your bottom line long-term.