Effects of Paid Time Off

At the height of the “Great Resignation” in 2021, more than 50 million U.S. workers quit due to stress, burnout and limited benefits. The U.S. remains the only country in the Organisation for Economic Co-operation and Development that does not guarantee paid time off (PTO), paid vacation or paid maternity leave. With the cost to replace a single employee reaching a full year’s salary, retention has become a critical concern for employers.

A first-of-its-kind study using 18 years of data and more than 32,000 observations of early-career men and women finds that PTO strongly affects resignations. Offering just one to five days of PTO produced only modest reductions in quitting and had no meaningful effect when men and women were analyzed separately. However, providing six to 10 days significantly lowered resignations – especially for men. The strongest effect emerged at 11 or more paid days off, where both men and women were substantially less likely to leave their jobs. The findings show that meaningful PTO is not a perk – it’s a proven strategy to keep employees.

“Our research shows that the number of paid days off plays a meaningful role in retention. Moving forward, it will be crucial to carefully weigh the costs of offering PTO against the far greater costs of losing employees, so organizations can make benefits decisions that truly support both their workforce and their bottom line,” said Candice M. Vander Weerdt, Ph.D., corresponding author and a professor in the Department of Management at the College of Business at CSU.

Read the press release.