A 'micro-retirement' may be the best way to retain Gen Z

• Key Insight: Discover how mid-career "micro-retirements" are redefining retention strategies.
• What's at Stake: Without policy, firms risk higher turnover and loss of institutional knowledge.
• Expert Quote: "Gen Z are seeking alternative career rhythms to avoid burnout," says Lisa Reyes, Paychex.
• Source: Bullets generated by AI with editorial review

Instead of waiting decades for retirement, young talent want to take a break mid-career to rest, reset and realign their lives long before they turn 65.

Thirteen percent of millennials and nearly one in 10 Gen Zers are planning a "micro-retirement" in 2025, according to a survey from workplace insights platform SideHustles.com. Unlike a true retirement, the term refers to a temporary extended break from work. While the concept of employees' taking a leave of absence isn't necessarily new to leaders, they may need to rethink their strategy to meet this new demand. 

"Young talent, especially Gen Z, are seeing some of the older generations that had more traditional work ethics stressed and burning out," says Lisa Reyes, leader of Paychex's HR center of excellence strategy and talent enablement. "They want a different path." 

Read more: Growing number of Americans concerned that retirement is out of reach

The structure of micro-retirements most closely resembles that of a work sabbatical or extended PTO, Reyes says, with a few key differences that set them apart. For example, sabbaticals are typically used as a type of professional development strategy and can last up to a whole year. In comparison, due to younger talents' push for a better work-life balance, micro-retirements are primarily used for personal development instead. According to the survey, 57% of employees intend to use their allotted time for mental health recovery, 52% for travel and new experiences and 29% for creative projects. 

"When people feel like they're allowed to take these kinds of breaks, they're more likely to want to come back," Reyes says. "That's significantly better than losing an employee that's been burned out because they didn't have time to pause. If they frame this policy correctly and make it happen, it could save them the cost of turnover." 

Currently, 59% of all employees — including 60% of millennials and 63% of Gen Zers — would consider a micro-retirement in the future, with 75% wanting organizations to invest in formal micro-retirement policies the same way they do leaves and sabbaticals. 

Finding the right strategy

An organization's approach to micro-retirements will vary by company size and industry, but success depends on setting clear parameters and eligibility rules. Typically, this benefit would be reserved for employees with some tenure rather than new hires. Organizations must also determine whether the leave will be paid, unpaid, or subsidized, and ensure compliance with local laws around time off and benefits continuation, which can differ by state. Other key considerations include defining the length of the leave and establishing a reasonable notice period — ideally three to six months — to give the company time to plan and prepare.

Read more: Gen Z leads in retirement readiness due to better DC plan design

"There is definitely a risk of knowledge loss that could happen during these leaves," Reyes says. "Putting in place clear documentation processes, cross training and knowledge sharing for the employees who will be stepping up to manage that temporary workforce gap is going to be really important, too."

Micro-retirements as a benefit can be a helpful tool in attracting top talent and improving retention, Reyes says, effectively countering the trend of employees leaving after only a year or two. By making employees eligible after a few years, organizations can encourage longer tenures, preserve institutional knowledge and build a more experienced, committed workforce.

"Appealing to these next generations has become critical," Reyes says. "They bring with them new knowledge and new ways of doing things that businesses are going to need in order to be successful years down the road, which means embracing the shifts and trends that they value."