2020 posed many challenges for Australians, both personally and professionally. One major HR challenge most organisations are facing is an excess of annual leave liability. With lockdowns, cancelled flights and border closures, many Australians were unable to make use of their annual leave, clocking up a lot more than usual.
This article will help you understand how accrued leave can become a financial liability, how to manage it proactively, two examples of Aussie organisations that effectively manage their leave and best practice tips for dealing with excess leave.
According to the National Employment Standards (NES), Australia’s minimum leave entitlements include 20 days of paid annual leave per year of employment. In addition to this, employees are also given 10 days of personal/carer’s leave, community service leave and long service entitlements. This can make it difficult for managers to keep track of as there are various awards involved across a single organisation.
So when does leave become a financial liability? As soon as an employee decides to leave an organisation. Not only is their leave balance paid out, but it’s paid at the current rate and not at the rate when the leave was accrued. This causes two problems – untaken leave is recorded on the balance sheet as a liability and it poses a cash flow risk if companies find themselves owing a huge sum to departing employees.
Managing employee leave is about understanding the balance between allowing employees to take leave on their own terms and ensuring smooth operations when they’re away.
Managers are expected to stay one step ahead by regularly checking leave balance, but reporting on leave so it’s understood at a glance can be tricky. The best way to track leave is to show the data in an org chart and by using conditional formatting that highlights employees with excessive leave. Visualising leave balances across the organisation also helps executives easily identify which departments have the most number of leave days. Having this information visible to the employee and managers will also create a soft reminder for booking time off.
Other ways managers can stay proactive:
Below are two examples of Australian organisations that use Navigo’s leave liability reporting charts to improve leave management:
Below is a demo chart highlighting excessive leave in the organisation. This chart can be accessed by all employees but any sensitive information will only be visible to their respective line managers.
Before we give any tips for managing excessive leave days, make sure you have checked the following items:
Since 2020 wasn’t the year we hoped it would be, employees didn’t take many days off, which led to more leave being accrued. While this is understandable, managers need to stay on top of holiday policies as the cost of leave liability far outweighs the benefits.
As mentioned earlier, a tailored annual leave plan would be beneficial. This works best if you clearly define your expectations and create a strategy that suits both parties.
Here’s some other suggestions for encouraging your employees to take a well-deserved break and for removing any stigma related to leave:
Don’t forget to ease your employees into work once they’re back, you don’t want them to regret taking leave. Give them time to catch up with their existing tasks before handing them any new ones. So, make sure you play your part in encouraging your staff to take a break this year!