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Employees who want to boost their performance, ace year-end reviews, and move up in the company just need to work more hours and burn that midnight oil, right? 

Not so fast. 

It turns out, one of the best ways for workers (talent pros included) to get ahead is to. . . take a break. Beach chairs and umbrella drinks may be what employees really need to bring their best selves to work.  

While ample PTO may seem like a nice-to-have, companies can only benefit when they offer it. According to a February report by Future Forum, 42% of the global workforce is experiencing burnout. That’s an increase of 2% from the previous quarter, and the highest percentage recorded since May 2021. When employees take vacation, burnout goes down and performance and retention go up. And in this tight labor market, companies that offer generous PTO policies — as well as a supportive culture — have a serious competitive edge. 

Before you quit reading so you can book the next flight to Bali, let’s unpack why PTO matters for employees and companies alike.

The problem: Employees aren’t using all their PTO 

PTO only benefits employees if they use it — and many don’t. According to a recent study by Pew Research, 46% of U.S. workers who receive paid time off from their employers take less than what they’re offered. Why? Some of those surveyed felt they didn’t need all the time they were given. Others worried that if they took vacation, they’d fall behind in their work. 

The study also offered a few more intriguing findings, including: 

Managers are more likely than non-managers to say they take less time off than what was available (54% vs. 42%).Women are more likely than men to say they felt badly about taking time off because it created additional work for their coworkers (48% of women vs. 39% of men). Black workers are more likely than white workers to say that they took less time off than they were allowed because they were afraid of losing their jobs (21% vs. 13%). 

Another study by Gusto found that remote workers took 5.5% less vacation time than non-remote workers, and were 22% less likely to take any vacation time at all. The reason? Remote workers feel less burnt out due to their more flexible schedules. But on the flip side, they also felt less entitled to vacation time because they didn’t have to physically be in an office. 

The good news: PTO increases performance and promotes retention

There are real, business-related reasons why companies would do well to encourage PTO. When employees feel overwhelmed by work, they can have difficulty concentrating, experience forgetfulness, and struggle to solve problems. PTO (along with reasonable workloads) can be the antidote. Employees can catch up on sleep and rest, not to mention quiet their minds enough for great ideas to bubble up to the surface. 

That was the case for Lin-Manuel Miranda, who got the idea for his musical Hamilton while on vacation. “It’s no accident,” Lin-Manuel told the Huffington Post, “that the best idea I’ve ever had in my life — perhaps maybe the best one I’ll ever have in my life — came to me on vacation. The moment my brain got a moment’s rest, Hamilton walked into it.” 

While most employees probably won’t come up with the equivalent of a Tony Award-winning play while on vacation, they’ll still benefit. An EY study found that for every additional 10 hours of vacation time that workers took, their year-end performance improved by 8%. Meanwhile, another study found that when employees used all their vacation time, it increased their chances of getting a promotion or raise. 

Vacations can boost retention too. The same EY study found that employees who took vacations more often were less likely to leave the company. 

How to create a culture that supports time off 

The word vacation derives from a Latin word that means to “be unoccupied.” Yet as far as we can tell, being unoccupied shouldn’t include checking emails, joining video conferencing meetings, or reading briefs while sitting in a foreign cafe. 

Unfortunately, many employees continue to work while on PTO, depriving them of the full benefits of time off. More than half (56%) of employees recently surveyed by Visier said they stay connected to the office during time off. Almost all do this by choice, so they don’t fall behind or to give them peace of mind. 

When employees work on vacation, however, they’re more likely to quit their jobs. The Visier report found that nearly half (44%) of full-time employees think about quitting while on vacation. Of those who think about it, the ones who stayed “very connected” to the job during PTO were 36% more likely to actually quit. This was especially true for Millennial and Gen Z employees.

Companies can better reap the rewards of vacation when they create cultures that encourage and even celebrate time off. One of the best ways to do this is by having senior leaders go on vacations and unplug themselves. When they model this kind of self-care and emphasize that they’re really going to disconnect, managers and employees feel safe doing the same. 

Managers can also encourage employees to use automated out-of-office email replies, saying that they’re unreachable while on vacation. An example of this could be as simple as: I’ll be on vacation starting tomorrow and won’t be reachable until [date]. For any urgent matters, please contact [colleague’s name].

Final thoughts: If you want employees to take vacation, require minimum time off

Companies could also follow the example of San Francisco-based software development company Carta. Like many companies, Carta offers unlimited PTO, but with a twist — it requires employees to take at least three weeks off per year. “With minimum time off,” Suzy Walther, Carta’s former chief people officer, writes, “we avoid the pitfalls of unlimited time off by making sure that our people actually take time off.”

As mandates from leadership go, this is one that would spur most employees to run out and shout for joy — or at least head to a favorite Airbnb for some well-deserved downtime. “We want our employees to be less stressed, more creative, and just generally happier,” she adds. “Time off, when used, does all that and more.”

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