Top 4 mistakes when it comes to leave management

It’s that time of the year when everybody has one thing on their mind – holidays. 2022 has been another tough year for small businesses and a lot of staff are tired and ready for a break. How you manage your leave policies is critical for your business’ success, writes Phil Parisis, General Manager of Product & Sales at My Business.

Being on top of leave allows you to be on top of operational costs and reduces the risk to your bottom line.

Here are the top mistakes small businesses make when it comes to leave management.

1. Not having a leave policy

Every business should have a leave policy, and staff should be aware of it and what their entitlements are. A clear leave policy means your staff can get the break that they require to be able to run your business efficiently. It also stops claims of favouritism and is better for workplace morale.

As well as clear guidance on compulsory paid leave entitlements, a policy also provides the opportunity for other types of leave to act as incentives for staff, such as birthdays off or having a ‘me’ day.

2. Not understanding different types of leave

It’s really important as a business owner that you understand the different types of leave and that you categorise your staff requests correctly.

Federal paid leave entitlements for permanent employees include annual leave, sick leave, personal/carers leave, compassionate leave and workers’ compensation, whilst there are also state-based pay leave entitlements such as long service leave.

Small business owners need to make sure they’re across the latest leave entitlements, including the new domestic violence and family leave – which comes into effect for large companies in March and small businesses in June – adding an extra ten paid days a year for those affected.

3. Forcing staff to go on leave

Where the relevant award permits, employees can be directed to take annual leave during a shutdown period, provided it’s a reasonable request.

Whilst it’s common for many small businesses to have a forced shutdown period, particularly over Christmas/New Year, often owners don’t give their staff enough notice about this. Good communication is critical to ensure staff have enough leave to take. Businesses should be informing staff in March or April about end-of-year shutdowns and also speaking with new employees about what the expectations are and what they can do if they don’t have enough of a leave balance by then.

4. Letting staff accrue leave

There’s a fine line between balancing leave requests to ensure you’re keeping staff happy but also stopping leave from being stockpiled. Too much leave is a liability for your business. Around 40 or 50 days of accrued annual leave can easily translate to a $100,000 – $150,000 payout if a staff member leaves. Likewise, everybody taking leave at the same time is also a risk for your business.

This is why it’s important to have a clear leave policy that outlines peak periods and slow periods and gives guidelines as to when leave should be taken. Generally, an annual leave balance is considered excessive if an employee has more than eight weeks of leave accrued or ten weeks if they’re a shift worker.

Always check the relevant award, but there are provisions for employers to direct an employee with excessive leave to take it in certain circumstances.

A leave management strategy is often overlooked by small business owners caught up in the day-to-day running of operations, but it’s critical for success. Having a robust plan in place for leave management not only re-energises your staff but also enables strong cash flow in your business and gives you the ability to plan ahead.

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