Employees face a two-fold risk if they do not take the leave they are legally entitled to. Firstly, they could forfeit their leave after a pre-determined period, depending on their company policy. Secondly, they could be diagnosed with burn out and be placed on extended sick leave. This places the organisation at significant financial risk, says Nicol Myburgh, Head of the HR Business Unit at CRS Technologies.
According to legislation, five-day week workers are entitled to 21 consecutive days annual leave on full pay in a leave cycle. This translates to 15 working days per annum if the employee works for five days a week, and 18 working days if they work a six-day week.
Leave pay should be paid before the leave starts or, if agreed, on the usual payday. If an employee resigns, they must be paid for any leave accrued but not taken, at a rate of one day’s pay for every 17 days worked, unless the policy allows for more leave. The law also stipulates that an employer must grant annual leave not later than six months after the annual leave cycle. This usually refers to a period of 12 months, commencing from the first day of employment or from the end of the previous leave cycle.
According to Myburgh, many leave policies do not cater for staff not taking their annual leave. “This could result in a huge liability of accumulated annual leave. For example, if an employee has accumulated 100 days of leave and resigns, this must be paid out on termination. Translating to the equivalent of several months’ salary, it is an expense which very few organisations can afford.”
Myburgh recommends that the company leave policy must therefore be regularly reviewed to ensure it remains in line with operational requirements. “One of the reasons policies include a leave forfeiture clause is to motivate staff to go on leave,” he says.
A trend has emerged where employees are paid in lieu of taking holiday. This is not in accordance with the Basic Conditions of Employment Act, says Myburgh. “According to legislation, a company cannot pay out leave except on termination of employment.”
“Unpaid leave, however, is legal,” he points out. “This could see a company reduce an employee’s salary by the value of one day’s annual leave for every day’s unpaid leave. Essentially, the employee is purchasing a day’s annual leave.”
Companies should strive to create a culture of caring for their staff, and employee engagement, which includes encouraging them to take leave.
“Policies must be put in place to force staff to go on leave while being cognisant of workloads. An employee might have accumulated a considerable amount of leave but has so much work to complete that they would rather forfeit their leave than get behind in their work,” says Myburgh.
“Employers can, at the very least, be more accommodating regarding their employees’ expected work output and put measures in place that make it easier for employees to go on leave without having to stress about uncompleted work.
“Some businesses also implement an annual shutdown, which sees the company closing (typically between Christmas and New Year) completely so that no one is able to work. Consequently, staff are forced to take leave during this time.”
In such an instance, the employer is entitled to stipulate that annual leave must be taken to coincide with the shutdown period. Should an employee take their annual leave at another time during the year, then the shutdown period will be treated as unpaid leave.
“Irrespective of the strategy employed, companies must do everything in their power to encourage their employees to take their annual leave. Not only is it beneficial for the individual and limits the possibility of burnout, it also mitigates financial risk for the business,” Myburgh concludes.
As always, CRS Technologies is available to assist clients. For more information and advice, contact [email protected]
About CRS Technologies
CRS Technologies is a leading provider of solutions and services to the growing human resources (HR) and human capital management (HCM) industries.
Following its establishment in 1985, the Johannesburg-based company quickly found its niche in the HR, people management and payroll sector and soon matured into the specialist of choice for blue chip organisations and SMMEs throughout Africa.
Today CRS is acknowledged as the most proficient HR and payroll solutions company on the continent, underpinned by solutions and services that help create workplaces of engaged and committed employees. Our approach to market is about maximising value between employer and employee, integrated with innovative technology that optimises people and grows businesses.
CRS achieves competitive advantage through its commitment to global best practice in HCM and its drive to transform HR departments into strategic, valued-added business units, be it through bespoke software and services or shared industry insight.