Most Americans and many Europeans don't take all the vacation they're entitled to. In the U.S., workers sacrifice more than half their allocated vacation time--during which they're paid not to work--to their companies. As an employer, this is the worst thing you can let your employees do.
To prevent it, the first step is to undertand why anyone in their right mind would not use the gift of time.
Most people I talk to are afraid. In the current economic climate, they worry that their employers will learn to live without them and that they'll come back to no job at all. Some worry that, in their absence, their co-workers will flaunt their energetic expertise, effectively stealing their jobs. A few have concerns that their jobs will be designed out of the system if they aren't there to defend them. And many fear that taking vacation will be construed as a lack of seriousness or commitment.
A little more rationally, a few careful executives I've talked to didn't want to spend money to go away, so they figured they may as well work. And more than a few have said that time off is now so alien to them that they wouldn't know what to do with it.
But none of these excuses really adds up. If a one- or two-week absence proves an employee is unnecessary, others would have figured that out by now. In most companies, everyone is so overstretched that the prospect of anyone taking more work is implausible, if not also impossible. And if a job is destined for the ax, the employee's presence there to defend it won't make any difference. Be the first to let your employees know this!
People are given vacation not out of kindness but out of your self-interest. You need people to be rested and fresh enough to think well. Consider the biology of fatigue. After 24 hours of sleep deprivation, there is an overall reduction of 6% in glucose reaching the brain. That loss isn't shared equally; as the thalamus works overtime to keep you alert, the parietal lobe and the prefrontal cortex lose 12% to 14% of their glucose. And those are the areas you need most for thinking--for distinguishing between ideas, social control, and the ability to tell the difference between good and bad. In other words, the more tired your employees get, the less able they are to effectively manage themselves and do powerful critical thinking. They may be so tired they can't even see how much they need a break.
Saving money is always wise, but I've had some of my best breaks at home; after all, I've spent a fortune on the place and, when I'm working, I rarely have time to enjoy it. And taking that time often reminds me that I do still have a few interests beyond my work. Your employees will realize this, too--and more, of course, if they take the vacation they're owed.
So, as the boss, make sure the people who work for you use every day you give them. March them out the door if you have to.
You should book your vacation now, too. The only thing you have to fear is time itself.