Why time off may be the ultimate bonus for employee engagement

As organisations seek new ways to motivate employees and improve retention, a growing body of research suggests that the most meaningful rewards may not come in the form of cash. According to a study published in the Journal of Managerial Psychology by Alice Lee-Yoon of the University of Missouri-St. Louis and Sanford E. DeVoe of UCLA Anderson School of Management, employees feel significantly more valued and “human” when rewarded with time off instead of money.

The researchers examined how different forms of rewards influence employees’ sense of humanness—defined as being recognised at work for one’s full self, including emotions, relationships, and worth beyond outputs. They found that employees who received vacation time reported stronger feelings of appreciation and belonging than those who received monetary bonuses of equal value. This effect held true across occupations and income levels, suggesting that time off can foster a deeper sense of respect and empathy in the workplace.

In their first study, Lee-Yoon and DeVoe surveyed more than 1,500 full-time employees across clerical, managerial, and professional roles, asking them to recall either a monetary or vacation-related bonus they had received. Those reflecting on vacation rewards used words like “emotional,” “warm,” and “sophisticated,” while those recalling monetary rewards were more likely to describe their experiences as “robotic” or “superficial.” The difference underscored how time-based rewards can strengthen employees’ connection to their work and organisation.

Subsequent experiments reinforced this finding. In one scenario, participants were told to imagine being a marketing consultant earning US$54,000 with two weeks of annual leave, and then offered either an extra week’s pay or an additional week of vacation. Those who imagined receiving the extra vacation reported a stronger sense of work-life separation factor closely linked to well-being and long-term engagement. Another experiment found that employees who were uninterrupted during their vacation, receiving personal rather than work-related messages, experienced greater feelings of humanness, job satisfaction, and engagement.

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While many studies focus on the negative aspects of work, such as burnout and stress, Lee-Yoon and DeVoe’s research explores the positive psychological effects of detachment. Their findings offer practical insights for employers: rewarding employees with time off can demonstrate genuine care for their wellbeing while promoting engagement and retention. Unlike monetary incentives, which are often viewed as transactional, vacation-based rewards communicate trust and empathy—qualities increasingly valued in modern workplaces.

The research also highlighted an ongoing disconnect between available benefits and actual employee behaviour. Despite recognising the value of rest, many employees fail to take full advantage of their paid time off. A 2023 survey by fintech firm Sorbet found that 62% of employees in the US did not use all their vacation days, up from 57% in 2022. Many cited pressure from supervisors or concerns about returning to a backlog of work as reasons for skipping time off.

In contrast to many countries that mandate a minimum number of paid vacation days, the US does not. This makes discretionary time-off rewards a powerful yet underutilised tool for organisations seeking to foster loyalty and engagement. As Lee-Yoon and DeVoe note, “Organisations aiming to enhance employee wellbeing and reinforce humane workplace values might benefit from incorporating time-based rewards into their incentive structures.”