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Annual leave management: the essential guide

Monika Slawinska

1. What is annual leave management?

Annual leave management is the administration of employees’ annual leave entitlement in a company which should abide by the minimum leave entitlement. How companies handle annual leave management depends on their local regulations and internal company policies. The most common types of leave are holiday, remote working, and sick leave.

2. Paid annual leave regulations:

How much paid annual leave an employee is entitled to is subject to federal and internal company policies. In fact, paid annual leave regulations differ greatly across the globe. While every country belonging to the European Union has at least four work weeks of paid holidays, the United States does not have any regulations regarding minimum paid annual leave.

For the most part, all workers, including part-time workers, are entitled to paid annual leave. The right for paid annual leave is also subject to federal and company policies. Sick leave also falls under the paid annual leave category.

Other common types of leave that need to be considered in annual leave management include:

The above mentioned leave of absences are subject to contractual agreements. Employers may offer extended annual leave for their employees, but are not allowed in any way to provide less than the minimum paid leave set by employment laws. Due to the variation in paid leave regulations, it is important to work with a leave management tool that allows you to stay compliant with the law and manage annual leave policies according to location with the greatest of ease.

3. Why annual leave management can be a nightmare:

Due to its nature, annual leave management has become a nightmare for small and medium businesses, even if they manage small teams. The annual leave management process will always require someone in the team to review remaining leave balances and based on these, decide whether or not to approve leave requests made by employees.

This person’s sole decision can completely break the business operations if too many overlapping holiday requests are granted. Besides the big responsibility of overseeing annual leave management, manually tracking and updating remaining annual leave every single time a request is granting is too time consuming to be effective.

3.1. The problem with annual leave management

In an effort to provide an effective annual leave management, many companies still use on the wall calendars or a excel leave planner. These two very common ways to manage annual leave entitlement have proven to be error-prone and ineffective.

Wall calendars can become overwhelming and filled with sticky notes that may be overlooked by the annual leave management responsible. What’s more, they do nothing to track existing absences or remaining leave balances.

What about the excel leave planner? While it’s a better way to track absences and remaining leave entitlements, they’re still error prone. In fact, 88% of internal spreadsheets contain mistakes. It only takes an incorrect formula to replicate the mistake across the rest of the annual leave records and trigger chaos.

What’s worse, most employees request leave by email, word-of mouth or even paper leave request forms. Without managers having a clear overview of every existing leave requests, they can easily be forgotten and result in unexpected absences. Considering 77% of employees expect easier ways to complete routine tasks such as requesting leave, it’s important to look for a more effective annual leave management.

4. Best practices for annual leave management

While using an absence management software is great to automate the administrative parts of it, there’s still some human intervention needed. Here are a couple of best practices to improve time off management

4.1. Talk about your annual leave management rules during training

Annual leave management can only be successful when everyone is well-informed about annual leave policies. Set expectations regarding holiday approval during orientation. Let new hires know that it might be hard to grant holidays during peak periods. Encourage them to share their holiday plans well in advance, this will ensure your annual leave management stays on point.

4.2. Introduce absence management policies

If your company suffers from high absenteeism levels, then you should implement absence policies that deter and offset the negatives of poor attendance. How companies implement these policies varies by preference. The most common practices include return-to work interviews, trigger mechanisms to review attendance, implementing an annual leave management tool, and providing flexible schedules or remote working. In this absenteeism article, we take a deeper look at how the right strategies can help you decrease high absenteeism levels.

4.3. Encourage holiday planning well in advance for a better annual leave management

How far in advance you decide to plan holidays depends on your company. For instance, in the manufacturing sector, employees are requested to plan their holidays for the coming year. While in the healthcare industry, holidays are planned from three to five months in advance. You don’t need to ask employees to plan their vacation so ahead of time, but 4-5 weeks prior to their holiday can help you get a more structured annual leave management and adjust operations more flexibly.

5. Meet digital absence management:

In order to make the benefits of the digital HR available to SMEs, we created a cost-effective solution with time-off management that feels like holiday. With kiwiHR, you’ll love your holiday manager as much as your holiday.

  • Your employees can request leave on any device at any time and enjoy lightning fast absence  management.
  • Set annual leave policies once and be done. Define allowances for different types of leave such as sick leave, holidays, remote working or create your own if needed. Assign your employees to the correct policy, and check holiday accruals off your list!
  • Enjoy automatically updated and error-free leave balances. View remaining leave balances for each employee in a single source of truth. With a digital time off manager, you can forget about mistakes. 
  • Get a clear overview for requested leaves, overlaps with public holidays or other leave requests without losing remaining balances out of sight and employees’ annual leave history.
  • View the integrated calendar showing the whole company’s annual leave and synchronize it with your favorite calendar.
  • With a centralised overview of annual leave balances and filters to get the right information you can make data-driven decisions to approve or decline employees’ leave requests.
  • Get rid of paper records and save storage space. Keep your employees’ annual leave history digital and clutter-free in a single and secure HR software.
  • Employees won’t need to draft an email every time they want to request leave anymore and you won’t have to look for hints in your mailbox to review employee’s leave history.

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