Outstanding annual leave balances are a significant financial liability. The longer employees go without taking leave, the greater the risk to a company’s cash flow in the long term. Implementing strategies to regularly reduce annual leave balances can be difficult.
Why annual leave balances hurt your bottom line
There are several reasons why companies accumulate large annual leave balances including:
- Limited capacity to cope without key team members
- Employee aversion to a work backlog while on leave
- Employees hoarding leave for getaways or for serious illness
These factors contribute to increased financial liability which can diminish the overall value of a company. Lengthy periods without leave also has a detrimental effect on employee performance and well-being. Refraining from taking leave can cause a loss of productivity and job dissatisfaction which can have a wider, negative effect on company performance.
Reducing the liability
Employers can implement several strategies to reduce liability and encourage regular, appropriate use of leave including:
- Promoting leisure travel deals within the workplace
- Offering special incentives for employees who take requisite leave before agreed times
- Using travel vouchers, gift cards or discounts as rewards & bonuses
- Internal promotion of the health and well-being benefits of taking leave
- Offer an experienced travel consultant readily available to staff
Take the time to assess your staff annual leave balances, set a maximum amount of time an employee can hold in leave. By implementing products and strategies to counteract annual leave hoarding you will limit your liability as the employer and increase overall staff morale.
Pender Accounting Group offers tailored advisory services to our medium to large corporate clients. Partnering with you throughout the process, we offer specialised services to give peace of mind, putting individual and corporate wealth creation front of mind. Get in touch to arrange an advisory consultation.