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Personal Leave Build Up – A Payroll Nightmare

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Personal leave build up is one of many challenges faced by any business regardless of its size. As an employer, it is important to keep an eye on the leave balances of your employees as a buildup will incur an increased leave liability on your company’s balance sheet. Just as importantly, it is important that staff are encouraged to take leave to ensure they are performing at optimum levels throughout the year.  Below are ways to manage the build-up of any leave.

 Pay out excess leave

 A slightly expensive but a good strategy to curb personal leave build up is to pay out excessive leave.  By law, an organisation can only reduce leave to the statutory leave limit as per the employee’s employment agreement.  In other words, if an employee is entitled to 4 weeks of leave per annum, their leave entitlements cannot be reduced below this threshold unless specific consent and agreement has been reached with the employee.  As you will have to pay for leave entitlements one way or the other, it may be prudent to pay them when you can afford it. This can also assist in managing staff presence for major projects and avoid a scenario whereby staff are absent for an extended period of time. 

 Track leave balances regularly

 It is highly recommended that managers regularly track leave accruals of their staff to avoid the problem altogether.  This can be done at the end of each payrun or end of month reporting. 

 An effective payroll software system should be able to report on all leave liabilities by department, state, branch and even cost centre level.  Some systems can also be configured to automatically populate the report at pre-defined intervals and sent automatically to each departmental manager.

 Other methods

 It is important that an organisation keeps the lines of communication open with its employees in regards to leave entitlements.  Some companies make it a company policy that employees cannot accrue leave beyond their annual entitlements.  If this is the case then employee employment contracts will need to include such a clause.  This will then make it a lot easy for organisations to enforce their policy should the need arise. Make provisions to keep employees informed about their leave through portals, updates and reminders. This will ensure that your staff are well-informed and make best use of their leave entitlements.

31 Jan, 13

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