Summer is here—are your employees actually taking time off?

Half of Americans skip vacation every summer. That's not just a wellness problem—it's a business risk your company can't afford to ignore.

According to the 2025 FlexJobs Work and PTO Pressure Report, 23% of U.S. workers didn't take a single day off in the previous year. Most employees also leave at least some PTO unused by year-end. And while it might seem like a personal choice, unused vacation time creates real problems for employers too.

What happens when employees don't take time off?

Overworked employees tend to be more stressed, less productive, and more prone to making costly errors. The FlexJobs report found the most common reason workers skip vacation is that they feel their workload is too heavy. Others worry that taking time off makes them look less committed—a perception that, left unchecked, quietly chips away at morale across your entire team.

There's also a compliance and fraud risk to consider. Employees running internal fraud schemes routinely avoid vacation and sick days because they fear exposure when someone else steps in. Requiring workers to take a minimum amount of PTO annually is one of the most effective controls you can put in place to reduce that risk.

How can employers encourage workers to take vacation?

Start with policy. If you don't already have a formal PTO structure, build one—and make sure managers communicate it clearly and consistently.

Beyond policy, here's what actually moves the needle:

• Arrange coverage: Workers are far more likely to unplug when they know their tasks are handled. Line up a colleague or temporary worker to fill in while they're out.
• Reassure employees: Make it explicit that taking earned vacation time won't hurt their performance reviews. Put it in writing if needed.
• Give managers visibility: Supervisors can't encourage time off if they don't know who has PTO sitting on the table. Payroll management systems that track running PTO totals make this easy.
• Send reminders: A third-party wellness platform can handle automated PTO reminders so the nudge doesn't always have to come from a manager.

What should you do about unused PTO at year-end?

If employees consistently roll into December with unused days, it's worth revisiting your plan design. A few options:

PTO carryover: Allow employees to roll over a set number of days into the new year. Just keep in mind that large carryover balances can add liabilities to your balance sheet. Also note that states like California and Montana restrict PTO forfeiture entirely, which may require you to carry over all unused balances regardless of your policy.

PTO contribution programs: These allow employees to convert unused vacation hours into retirement plan contributions—treated as pretax deferrals or employer profit sharing within your 401(k). If your current plan doesn't support this, you'll need to amend it and ensure the arrangement continues to comply with your plan document's eligibility, vesting, and distribution terms.

The real cost of unused PTO

Unused PTO isn't free. It represents deferred liability, reduced employee wellbeing, and a potential indicator of deeper organizational problems. Getting ahead of it now—before the summer rush—pays dividends well beyond the warmer months.

At SD Mayer, we help businesses evaluate their PTO policies, calculate the hidden costs of unused leave, and design tax-advantaged arrangements that work for both employers and employees. Get in touch to find out how we can help your team actually enjoy the summer.