Mitigating the cost of untaken holiday

Date: Wednesday 15 July 2020

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Our colleagues at Xecutive Search have sent through some advice for businesses to help manage and void staff shortages as employees start to return to work, when the company could be facing a backlog of annual leave requests.

Annual leave backlog. As we move into the second half of 2020, it’s possible that many returning employees could still have at least 50% of their annual leave owed. To avoid significant operational problems, it might be tempting to pay employees for half of their annual leave days but, as well as being a significant hit to cash flow, you’re not actually allowed to contract out of the statutory minimum holiday entitlement by paying employees instead. Tip. You could buy out an employee’s holiday entitlement above the statutory minimum. What else could you do?

Encourage staff to take leave during lockdown. With so many employees working from home and unable to travel or visit family, many are reluctant to consider annual leave. Send out a memo reminding them to take time off. Make sure it highlights the restorative value of being away from the demands of their inbox and clients for a few days.

Speak to furloughed employees. It could be attractive to furloughed employees to take annual leave if they are only receiving 80% their pay as they would get a 20% top up for any holiday days taken. You could, like some businesses, require furloughed employees to take part of their annual leave during furlough.

Take advantage of the relaxed carry-over rules. Rules exist to require employees to use their annual leave during the leave year in which it is accrued. But new regulations came into force in March which allow some employees to carry over up to four weeks of annual leave, that they have not been able to take due to the impact of the coronavirus crisis, to the next two leave years.

Plan layered annual leave in advance. Many employers are asking employees to have taken a certain amount of leave, say 40% of their annual entitlement, by the end of August (if they have a January to December holiday year).

The key is to highlight the benefits to staff of taking leave while they’re working at home or furloughed. You could also ask employees to take a specific number of leave days by a certain date.

 

 

 

 

^{This advice was taken from:  Tips & Advice Financial Controller}

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