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Unlocking the Importance of Leave Management in Organizations

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When it comes to the administration and registration of employee absences, it can be easy to think that "she is probably right". But there are good reasons why you should be careful about managing, registering and paying leave.

Proper leave management means that your business can be run more efficiently, that you cover your employees' time off needs and that you meet your legal obligations.

A number of recent high-profile cases involving large New Zealand employers out of control over holiday and holiday pay - including the Ministry of Business, Innovation and Employment (the ministry responsible for enforcing the holiday law) - have shown how serious non-compliance can be.

1. It is required by law!

First and foremost, you stay on the right side of the law if you keep your holiday in order and pay correctly.

According to the Holidays Act 2003, all employers in New Zealand must keep an accurate record of how many hours each individual employee works each day, the pay for these hours, as well as accrued, rightful and unused holiday.

The law exists to ensure that all employees get the paid holiday they are entitled to under the law:

  • Annual leave (at least 4 weeks a year after 12 months of employment);
  • Public holidays (up to 12 public holidays each year, if they are days they would normally work);
  • Sick leave and bereavement leave (usually after 6 months of employment);
  • Parental leave (a mix of paid and unpaid leave, depending on eligibility);
  • Leave in case of family violence (up to 10 days' paid leave after 6 months' employment).

When the leave is taken, the Holiday Act determines how it must be paid for each type of leave. Each type of leave has its own calculation method for payment, so it is not possible to start from one solution that suits everyone.

As we have seen in recent years, the calculation of holiday pay has created quite a few headaches for Kiwi businesses. Many companies, both large and small, have been caught red-handed in underpaying their employees' holidays.

Accurate overview of holiday and holiday days will eliminate or minimize errors in the calculation of holiday and holiday pay. The employees get the right number of vacation days and pay, and the company avoids having to pay out retroactive vacation or, even worse, being fined by the Employment Relations Authority (ERA) or a labor inspector and ending up in the news.

2. The point on the bottom line

Effective tracking and handling of leave can lead to reduced costs. Paid time off has a significant financial impact on a company's bottom line.

Temporary employees and temporary employees can cost much more than permanent employees. Or you may have to pay overtime pay if the employees substitute.

There are also other indirect costs and effects, such as that the quality of the goods or services may deteriorate due to under staffing, fatigue or less qualified substitutes, which may lead to lower customer satisfaction.

It can also lead to increased administrative costs and increased management time (to find suitable substitutes, train them, maintain morale, etc.), and potential safety issues with substitutes or overworked employees.

Another financial consequence of poor leave management is that employees can accumulate weeks or years of leave, which becomes a liability for the company if the employee resigns and has to be paid a lump sum.

Unpaid leave is registered as a liability in the company's accounts and can also become a problem if you want to sell the business.

3. Good planning of leaves and holidays

By planning the holidays of your employees in a good way, you can plan the absence in advance and ensure that you have sufficient substitutes, instead of having to improvise and risk falling short.

Although there is little you can do if several employees fall ill at the same time, holiday planning and holiday management will help reduce disruption to work, so that productivity does not decrease and the business can continue to meet its obligations and deadlines.

It also means that the work ethic in the team is not weakened. No one wants to be asked to take on extra work because the company forgot to plan the holiday process.

With an effective vacation planning service or software, it becomes easier and more accurate to keep track of your vacation. Management will spend less time monitoring and responding to leave requests, and the system will keep accurate records across the entire company, so you can easily control total leave amounts and demonstrate compliance with the law.

4. Employees' self-confidence and well-being

If the employees know that they are getting the leave they are entitled to, they will have greater confidence in the business. This means happier and more engaged employees who are motivated to be productive and contribute to the success of the business.

The employees also want to know that the business is organised. If the leave handling is poor, and several employees take leave at the same time, it may mean that the remaining employees have to work extra to cover up. This can lead to dissatisfaction if it happens regularly, and the damage is even greater if it turns out that you have not calculated the employees' holiday or holiday pay correctly.

Many good, modern leave systems make it possible for employees to see their leave balance and request leave electronically. This provides transparency, and the automation also reduces administration costs for the company.

5. Reduced absenteeism

It is important to take leave. It promotes good physical and mental health in the workplace and improves the balance between work and leisure, which reduces stress and unplanned days off.

Absenteeism can have a significant impact on any business. The Wellness in the Workplace Survey 2017 shows that in 2016, New Zealand businesses lost 6.6 million working days due to absenteeism, costing them $1.51 billion.

If you don't have the tools you need to track absence, especially sick leave, you may not know how many days a year your employees take off, and how much it affects the business.

Good systems for absence management can give you a much better understanding of the absence patterns in the business, and if there are problems, you have the opportunity to find solutions together with the employees.

In conclusion, efficient leave management is vital for legal compliance, cost reduction, effective planning, employee satisfaction, and minimizing absenteeism. Simplify the process with IceHrm.

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