In my first real job as an attorney, I made a huge mistake: I assumed I would have some time off. I had so much faith, in fact, that I made arrangements to fly home to visit my parents on Christmas Eve. But our office didn’t close on Christmas Eve. And the people in my office didn’t take time off. Ever. That year, I took one day off for vacation for the whole year. One day.
The next year, I was bold: I asked for a whole week off. My boss wasn’t thrilled but he relented. And since I had work to do, I had to call in to the office every day but, officially, I was on vacation.
In my first two years as a lawyer, I had taken six days of vacation. And I worked five out of six.
I realize that doesn’t make me special. As a rule, Americans don’t take vacation. According to a story on Marketplace, most Americans left about nine days of vacation time on the table in 2012. That same report cited a study from Hotwire which found that a whopping 87% of Americans would take more vacation trips if they felt they had the time and the money to do so.
Even when Americans have vacation time, they are scared to take it – often because they are afraid their bosses will think they’re lazy or that they could lose their jobs while on vacation. Employees and employers would both do well to change that: a lack of vacation cost employers in the long run. Employers who discourage vacations end up with stressed, unhappy employees. They also end up with unhealthy employees: not taking a vacation has been found to correspond to an increased chance of heart disease for both men and women. The cost of stress-related health care is estimated at $344 billion a year.
The silly thing is that the fix is incredibly simple: offer employees vacation time and encourage them to take it. There are few things that you can do that result in as many positive benefits and cost so little. It’s a thank you that doesn’t cost an employer cash out of pocket – and there’s often little to no tax consequences to the employee.
Cash bonuses are nice but they count as compensation. Similarly, stock options or other cash-equivalent incentives are treated as compensation. That costs the employer money – and both the employer and the employee will pay payroll taxes. But time off? It’s priceless. Really.
Hourly employees who are given time off without pay may appreciate an extra day or two of rest and there are no tax consequences to the employee and the employer. No work for hourly employees generally equals no pay (although it’s worth noting that some companies do have paid vacation for hourly employees). No pay equals no tax bite for the employee or the employer. But the plus side is a day or two to rest.
Salaried employees who are paid a weekly or monthly flat wage will have exactly the same tax consequences on vacation as if they had worked a “regular” week, assuming that it’s considered paid vacation time. In other words, if you get paid $3,000 for the month of February whether you are physically present or not – the tax and financial consequences to you of vacationing that month are exactly the same as if you had not taken a vacation. The perk is, of course, that the employee has the benefit of not working.
Don’t think employees will go for extra time off as compared to cash or other benefits? Think again. Some employers now allow employees to buy additional time off through payroll deductions or other arrangements. That option proved so popular that at least one employer had to scale the plan back because they were overwhelmed by employees clamoring for more time off. That should tell employers something.
Another employer has publicly acknowledged the benefits of employees who take a vacation. USAA, where employees can buy – and sell time off – has noted that more than three times more employees buy time off as sell it. Jeff Weiss, senior vice president of benefits at USAA, encourages those arrangements, saying:
We think time off is actually critical to productivity. When people take their time off to refresh and renew, we believe they service the members more effectively.
I agree. Happier employees are better employees. Whether you are an employer or an employee, don’t underestimate the value of vacation. And the tax consequences of most vacation plans are minimal – or non-existent. Employers should offer more time off – and employees should actually take it when it’s offered. Say it with me: Vacation is good.