Employee leave is an inevitable part of business life that can prove costly if employers are disorganised. Rebecca Spicer takes notes from H.R. experts who believe there is more to planning leave than making dates on a calendar.

As a business owner, taking leave is often a luxury and one taken at your discretion. When it comes to your employees, though, leave is their legal right, and so you need a system to avoid pressure and potential loss of productivity.

Leave comes in many forms, from annual, sick, carer’s and bereavement leave, to long service, maternity and parental leave. And while some of these can be more easily planned for than others, running your business so it can still operate efficiently with unexpected absences will be crucial to maintaining productivity.

While many employers might see leave as a hindrance to their business, keeping in mind some of the positive outcomes, and having effective processes in place to minimise the impact on your business, will make it a lot more productive.

Management consultant Christine Allan believes business owners should be considering and planning for staff leave on an ongoing basis, making it an intrinsic part of strategic planning and budgeting. “Let’s face it, leave is a fact of life whether you like it or not. It’s a mandated requirement so it needs to be planned for. When it’s not, people can come unstuck.”

Patricia Rowe is a lecturer in strategic human resource management at the University of Queensland, and she suggests business owners nominate at least one time in the year to gauge leave expectations from staff, and plan (as much as they can) for the year ahead. “By communicating this to staff, they will expect the boss to come around at the same time every year to ask when staff might like to take leave, and employees can plan for this with family and friends,” she says. “This annual planning formalises the process, it brings consistency to the business, and people like routines.”

And while staff have a right to take annual leave, for instance, the business owner doesn’t necessarily have to grant it for the time requested. “It’s a two-way street,” says Allan, which is why having a formal policy in place that outlines what staff need to do to apply for annual leave will help balance employer and employee needs.

Such a policy should be clearly communicated to staff and should outline things such as the best times for staff to take time off, how many staff members can take time off at any one time, how much notice they need to give, what forms they need to fill out and who they need to talk to regarding leave.

“If businesses have a policy that says, we allow ‘x’ number of people off at a certain time, then everybody knows that it’s first in first served. So it creates a bit of fairness,” adds Allan. This can be particularly useful in popular leave times such as school holidays.

It also keeps staff aware of what their entitlements are, says Kathy Bracken, senior human resource officer for ABL State Chamber. “A policy is helpful because different businesses have different theories and ways in which they have their leave structured. Some offer a lot more, some not so much. It depends if they’re covered by awards, whether they’re locked into legislation or whether they have the flexibility to offer other types of leave. So that all needs to be taken into consideration and people need to be aware.”

Allan suggests the policy should cover little things like redirecting email and voicemail, and a ‘what to do before you go’ list. “It’s surprising how many businesses can be a bit disorganised, and somebody goes off on leave and they’ve either not covered the staff member at all or they’ve just allowed them to leave their voicemail as it is. So you get customers who ring up over a four-week period and can’t get through to anyone, which is hugely frustrating, and it’s just not a good image.”

Working out when are the best times for staff to be away should be done during your annual planning period, says Rowe. “Many businesses operate in peaks and troughs, and so a lot will request staff take time off during the quiet times. However, some businesses have a more consistent production cycle so that’s where having a formal procedure or policy in place can help.”

Bracken agrees, but says there could also be different departments within the business with quieter periods in the year than others, so a business owner needs to factor this in and clearly communicate to staff when it’s preferable for them to take leave.

But it’s not just about employees taking leave, Allan adds. Business owners themselves need to consider when they’ll take time off, she says, because it can be unhealthy and detrimental to the business if they don’t take some time out to recharge the batteries. “They need to be thinking about what can happen to themselves if they don’t take leave,” she explains. “I think there’s still this mentality that ‘I can keep going, I’ve got to be there’. But we tend to start performing lower while thinking we’re performing at the same level.

“It’s about trade-offs. You might be getting your business up and running but your trade-off could be your long-term health, and it can also be that you might not be performing as well as you think, and your judgment might be impaired.”

Both Rowe and Allan suggest every business owner has a second-in-charge to manage the business while they are away. “Not only does it allow the owner to take holidays, but what happens if they have an accident?” says Allan. She says it’s also a developmental opportunity for the person you train up to take over, which will turn into a motivation and retention strategy for that particular staff member.

The best leaders, Bracken says, are those who trust in their top level of management. “The owner should give them enough scope and keep them informed so it isn’t so much of a burden if they do want to take time off and go away.”

For those business owners who are going to find it difficult to walk away from the business for a long period, she suggests, they can start to entrust in that next level down by taking a long weekend off to begin with. “Let those people have the opportunity to hold the reins while the owner is gone and see whether they sink or swim, or see where they need to improve. Then keep evolving it until the business owner feels they can leave the business for an extended period of time.” Rowe says the business owner can also consider which are the quieter times in the year and therefore the most opportune time for them to be away from the office, and allow for this when doing the annual planning.

The old saying, ‘no-one is indispensable’ is more true than most people think, and if you have an employee you think is irreplaceable, chances are you’re setting yourself up for disaster. “Especially for other forms of leave such as sick leave, carer’s leave and bereavement leave; these are a little harder to plan for but being aware of them is important. And, of course, having more than one person in your business who can perform a role will ease the pressure when this occurs,” says Rowe.

To ensure your team has the combination of skills required to cover any staff who might be on leave, Bracken suggests business owners ask themselves what are the skills within their employee group and who has the capabilities to do what.

“Look at what staff would like to do and maybe start to cross-train so you have that contingency plan or fall-back in place if an emergency situation occurs,” she says.

“Also, looking at things like succession planning will help. It’s obviousl
y for when people leave but it means they’ve already done that thinking of who can do what, or who is capable of stepping up to do what at what time, and what are the deficiencies.”

How business owners replace staff when on any type of leave will vary according to the type of business, the role that person performs, company structure and so on. But as Rowe says, it comes down to cash flow and management of workload.

“Depending on the nature of that work intensification, businesses might be able to save money by using work experience personnel from TAFE or even universities, giving these people the more mundane tasks and shifting things around internally to cover the more important tasks.”

Sometimes hiring temporary staff is your only fall-back when you need more hands on deck, but Bracken and Allan suggest business owners look at offering a lower level staff member a development opportunity to step into the role, and temping their lower level role, at a smaller expense to the business.

The business owner will also need to consider the direct costs of hiring additional staff in the short term, and any leave loadings staff are entitled to under awards or individual workplace agreements.

Allan warns that annual leave payments are also an expense on a business owner’s balance sheet. “So if you’ve got people who are owed more and more leave, you’re actually building up this significant liability and it’s a wise move to keep control of that.”

Bracken says that by accumulating leave, businesses will also take a loss if staff have been promoted or their salaries have increased due to performance reviews, because in most cases the business needs to pay for annual leave at a staff member’s current rate of pay, even though some of that leave would have been accumulated while they were being paid a lower rate.

But one of the forgotten costs is from a health point of view, she adds, because if staff don’t take any leave, eventually they’re going to get stressed, tired and run-down, and productivity will suffer.

Leave Payment Adjustments

Employers should be aware of changes made to the calculation of payment for accrued sick, carer’s and compassionate leave under the new WorkChoices legislation.

David Thompson, employment law partner at Hunt and Hunt, says changes introduced by the Australian Fair Pay and Conditions Standard involve a different method of calculation for payment of personal, carer’s and compassionate leave than for regular accrued annual leave, which can create a potential financial and administrative minefield for employers.

Under the new regulations, the calculation of these leave payments is made on the basis of what the employee would reasonably have expected to have earned if he or she had worked during that period. “What this means is that an employee has an entitlement to receive overtime payments, shift allowance and penalties if these would reasonably have been paid to the employee on the day(s) the leave was taken,” Thompson explains. “This has the potential to significantly increase the amount of leave payments owed, especially in workplaces where overtime, shift allowance, and penalties are common.”

However, it’s important that employers only use the different calculation method for leave accruing from March 27, 2006—the date the WorkChoices legislation came into effect—and leave accrued before March 27 should be calculated in the same manner as before.

“Employers would be wise to ensure that they set up separate systems of leave accrual and payment, for leave accrued prior to, and after March 27, where the potential to pay more than base rates is an issue,” Thompson suggests.

By contrast, the payment rule for accrued annual leave remains simply that the employee must be paid no less than his or her basic periodic rate of pay.

Five tips to manage leave

1.    Have a formal system for leave taking. This will help all employees feel that they are being treated equally.
2.    Have an agreed staffing plan in place to manage absences.
3.    If the business is cyclical, plan not to have staff take leave during peak periods.
4.    Have a procedures manual where leave taking policies are written down and communicated to all staff.
5.    Make sure that you, the owner, take leave to recharge the batteries.

* Source: Patricia Rowe, University of Queensland.