Unused leave a hefty burden for businesses

By Susan Edmunds

Businesses  can force staff to take leave at a certain time. Photo / Thinkstock
Businesses can force staff to take leave at a certain time. Photo / Thinkstock

Stashes of accrued leave are causing major headaches for employers - and many are using the holiday season to get rid of some of it.

Workers who do not use leave create a problem because the leave is registered in the company's books as a debt. As well as being an on-paper problem affecting the company's balance sheet, it can cause major problems when the employee's contract is terminated, and they have to be paid or if the staff member wants to take a lot of leave at once and cover has to be found.

Some firms, particularly big employers, require all leave to be taken every year, some will let it roll over for a couple of years and some do not address the issue.

But business coach Marti Amos said accrued leave could cause huge problems. "It is a problem typically when companies have a lot of employees and have not been putting money aside [to cover the leave owed]."

He said businesses such as service stations and trades would be especially affected, particularly if staff were working statutory holidays and collecting more leave than usual. "It can be the straw that breaks the camel's back, especially if it's [a firm] with thin margins and lots of employees."

Employment lawyer Michael Smyth said he had seen many employers allowing employees to accumulate a lot of leave. "They regret it. It's a huge liability."

Business NZ spokesman Paul Mackay said it was a common issue throughout the public and private sectors. "Leave stacks up into the next year and beyond. As leave accrues, it goes on the bottom line."

Smyth and Mackay said as well as the financial cost borne by the business, there were health and safety concerns around staff working for long periods without a break. "The purpose of leave is to take holidays, that's why there's limits on how much you can sell," Mackay said.

"There's a strong message that you have to have time off. If employees aren't taking leave, are they as effective as they can be?"

Since last year, businesses have been able to force staff to take leave at a certain time, if attempts to negotiate a mutually agreeable solution are unsuccessful. Employees can sell one week of leave per year back to their employer.

"The employer is able to force them to take leave. How often that tool is used, and how effectively, varies," Mackay said.

He said businesses and employees usually came to some agreement before it got to the stage where lawyers were involved.

A lot of leave balances will drop this month as companies close over Christmas.

Smyth said every business was entitled to one close-down a year but had to give staff 14 days' notice. If they had not been employed for a year, and thus had not accumulated any leave, the legal obligation was only that they were paid for the statutory holidays. But many businesses negotiated ways to pay their staff for the period. "Some employers have a policy of accruing leave on a month-to-month basis."

Smyth said the limitation on only one shutdown period per year could affect businesses caught up in the Christchurch earthquake.

"They may have already used their closedown period this year."

Mackay suggested that the managers of companies owing a lot of leave needed to sit down with their employees to work out a plan of what would be taken when and what would be bought back. "It falls back on common sense ... take into account the needs and wishes of the employees and the employer."

First Union secretary Robert Reid said the union had limited sympathy for people who did not want to take leave.

"[We] take a very strong position that holidays are there to be taken as holidays. Sometimes we are notified of people who have six, seven, eight or even nine weeks' unused holidays but for us that's actually not what we've struggled for. They can and should take them."

Amos estimated companies needed to keep aside 8 per cent of their payroll every year to cover accrued leave.

Forced on holiday

Adam, 25, was told he had to take some of his leave when he was owed almost nine weeks. He does not want to be identified for fear of inflaming the situation.

"As of September 11, I had 359.1 hours of annual leave owing. I was advised I had to cash out two weeks of annual leave and take five annual leave days before the Christmas period ... [My company] said if I didn't choose five days before Christmas, they would choose five days for me."

The company he works for shuts down for two weeks over the Christmas period but he was told that he had to take the week before that off, too. "I am now off starting from December 19 until January 16."

His leave owing now totals 286.9 hours.

Adam said he had not taken annual leave because he wanted to save it up to travel. "I have done very little [travelling] in the past.

"I had been saving [leave] up for travelling. It means I won't have as much leave available to pay the bills when I do eventually travel."

- Herald on Sunday

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