A new study by Florida Atlantic University and Cleveland State University reveals that offering paid time off can reduce employee turnover by 35%. This research explores the impact of PTO and flexible scheduling on job retention, offering crucial insights for employers.
A new study conducted by Florida Atlantic University and Cleveland State University uncovers that offering paid time off (PTO) significantly reduces employee turnover, shedding light on the pivotal role of modern workplace benefits. The research, published in the International Journal of Manpower, aims to help companies struggling to retain talented employees, especially in a labor market still reeling from the Great Recession and the COVID-19 pandemic.
In 2022, approximately 4.5 million U.S. workers quit their jobs, continuing a trend that has plagued the American labor market since the 2007 Great Recession. Companies face the ongoing challenge of attracting and keeping top talent, often at a staggering cost. Voluntary turnover costs U.S. businesses over $1 trillion annually, affecting everything from operations to customer relationships.
Using a nationally representative sample, the study examines how various benefits, including PTO, flexible scheduling, tuition benefits, health insurance and retirement benefits, influence an employee’s decision to stay or quit.
Notably, the study finds that access to PTO is associated with a 35% reduction in turnover for all workers, with a more significant reduction for men (41%) than women (28%).
However, PTO did not appear to impact job satisfaction directly. Both PTO and flexible scheduling independently contributed to lower turnover rates, but their effects did not compound each other.
“Our findings indicate that paid time off does not primarily affect turnover through increased job satisfaction,” co-author LeaAnne DeRigne, a professor in the Phyllis and Harvey Sandler School of Social Work within FAU’s College of Social Work and Criminal Justice, said in a news release. “While workers may feel satisfied with their job, the absence of adequate resources like PTO can still drive them to quit. Even when employees are content in their roles, the lack of sufficient time away from work can lead to burnout, stress or a sense of being undervalued, ultimately prompting them to leave. This highlights the importance of offering PTO as a key resource for retaining talent, beyond just enhancing job satisfaction.”
The study also delves into the impact of flexible scheduling, revealing that it is as effective as benefits like retirement plans in reducing turnover. For women, flexible scheduling proves just as valuable as tuition assistance and PTO.
“Business owners should weigh the costs of offering flexible scheduling against the expenses of employee replacement,” added DeRigne. “Additionally, research shows that older Americans are particularly responsive to flexible schedules, with many willing to return to work even at a reduced wage if given this flexibility.”
Replacing high-performing employees can have a significant impact on team performance, morale and overall business operations. The costs of losing such employees are often more substantial than losing those already dissatisfied. This points to the urgent need for businesses to address key turnover factors actively.
“Research has shown that voluntary turnover is not inevitable, with many employees saying that their decision to leave could have been prevented. This suggests that companies have an opportunity to address the underlying causes of turnover and retain key talent,” DeRigne added.
At an average cost of $2.94 per hour per employee, the expense of offering PTO is relatively low compared to the extensive costs associated with turnover, including recruitment, lost productivity and potential damage to client relationships.
“By investing in benefits like PTO, organizations can reduce the risk of turnover and improve employee retention, ultimately saving money in the long run,” added DeRigne.
In conclusion, the study’s insights provide a compelling argument for the strategic implementation of PTO and flexible scheduling. Businesses are encouraged to consider these benefits to foster a stable, satisfied workforce, potentially transforming retention strategies industry-wide.
Source: Florida Atlantic University