Why business owners need to get on top of leave balances after lockdowns

Despite the challenges, work from home arrangements during COVID lockdowns have certainly had their benefits. Recent studies suggest productivity has increased by as much as 47%, with companies also citing improved job satisfaction and higher attrition rates for employees.

However, there is one aspect of lockdowns that has gone largely undiscussed yet could present a very real risk to businesses.

With nowhere to go and nothing to do but work, accumulated leave balances have increased dramatically. In mid 2021, Roy Morgan stated that Australians have nearly 175 million days of annual leave due – up over 23 million days from early 2020!

This has undoubtedly increased more in the past 6 months, even with requirements to take leave over the Christmas period.

Leave liabilities are a risk no business can afford to ignore, especially during the so-called “Great Resignation”. The need to pay out excessive leave balances could be enough to put a business already under pressure into a serious predicament.

The borders are open…is it time for a holiday?

With borders now open, it’s a great time to encourage staff to take some much-needed time out and use up some of their leave.

The pandemic has had a significant impact on mental health, so continuing to work without taking the opportunity to “re-set” could be damaging to employees. It’s worth having honest conversations with your people and inviting them to think about what a decent holiday would look like for them.

As the threat of the pandemic eases, it is likely that businesses will see a boost in trade – from cafes and restaurants to medical practices, landscape gardeners, and so on.

Balancing leave with capacity planning may get a little tricker, however there are advanced scheduling systems that can make this process easier for you. They help you get a clear picture of resource availability versus need, so you can address the risk of accumulated leave while planning for an increase in trade.

Leave doesn’t always need to be taken in bulk

Not all leave entitlements need to be taken as multiple weeks away from work. Instead, try to engage with employees to find a solution that suits everyone.

For example, an employee may want to:

• work a 4-day week and use their leave to take a day off
• take a Friday and Monday off once a month
• take a Monday and Tuesday off every few weeks

This strategy can minimise the pressure on the business while reducing leave balances and making sure employees get the break they need.

In fact, recent studies show that the benefits of a 4-day working week are quite remarkable. A New Zealand firm that trialed a 4-day week found 78% of employees could more effectively balance their work and home life. 

Get help to manage financial risk

At RSM, we work with businesses to assess financial risks and the impact they could have – including leave liabilities. We then assist with planning to reduce these risks and ensure business cash flow is where it needs to be.

You can ask us to help you:

• develop a leave policy
• calculate liability and risk
• create a strategy to control risks
• manage cash flow, particularly in times of stress

Accumulated leave can go unnoticed in a business, but don’t underestimate the effect it could have on your business in the long run. Make time to evaluate your risk, develop a plan, engage with employees, and reduce the liability on your balance sheet.

For further information

To speak with a property and construction specialist from RSM, please contact your local RSM office.