Leave Management Guide for HR Managers

A leave simply means a day off from the office work apart from the holidays employees are entitled to. It is not required by you to work on all the seven days of the week to earn your salary. Also, you need not work on all working days even, according to the leave policy, to get your salary. You are also allowed additional leaves under certain circumstances. 

Many years ago, employees weren't given the privilege of paid leaves, but nowadays, all the employees are given the opportunity for paid leaves. Presently, leaves are one of the best-sought benefits in a job after the healthcare benefits. There are various types of leaves an employee can benefit from. The laws passed by the state governments guide all different kinds of leaves to be granted in a year. Some of these granted leaves expire at the end of the calendar year, while some are carried to the next year. In case of any unavoidable circumstances, if an employee has exhausted all their leaves and still wants more leaves, then they will have to suffer a pay cut for the number of days they want off. This is called at some places, leave without pay or LWP leave.

Why is leave management needed?

Being a vital function of the benefits administration, leave management is needed for various reasons. Some of them are discussed below:

• Statutory Compliance- Looking from a compliance angle, the employers must keep a record of the paid leaves apart from sanctioning them. In most of the states in India, leave management forms are useful for tracking records. For instance, in Karnataka, you can use form F or Form 14 for this purpose.
• Keeping records- If compliance is not required, still it is necessary to keep track of the paid leaves of the employees. Implementation and enforcement of leave policies are impossible without proper records being maintained. Employees are allowed to know information specific to the entitlements, leave policy, balance leaves remaining, and complete transaction history of leaves. Failing this process can lead to mistrust among the employees. A proper record of leaves is most important when an employee plans to leave the organisation, and the lack of appropriate records leads to disputes and aggrieved ex-employees.
• Planning and business operations- This is an area where proper employee leave management is highly required. In big companies, someone or the other is on leave on any given day, and if many are given leave on the same day, the work may get hampered. The manager must think about the situation for any given day before approving or rejecting leaves.
• Analytics- Tracking the absence and the leave-taking pattern of any employee is an activity of an HR professional. It can become problematic for HR to track leaves if there is no proper system for reporting leaves.

Challenges faced by lack of leave management policy

 Many unwanted situations come up without the presence of a proper leave management process. Any employee may require a better practice if they come across the scenarios mentioned below:

• The manager is unaware that a team member is on leave and not present at work.
• Without the approval of the manager, the HR admin extends your vacation.
• Leave of supporting engineers resulting in a delay of service can lead to unsatisfied customers. 
• The improper leaving account can occur if HR is not informed about employee leave.
• Employees have taken leaves way more than they are allowed to take.
• The leave policy of the organisation is not uniform for all the employees
• The remaining leaves of the employee are not correct, leading to an unhappy employee.
• A delay in leave approval may cause inconvenience to the employee
• HR admin or the manager needs to be contacted frequently by the employee for any leave query or approval.

All the problems mentioned above lead to the following challenges:

• Lack of trust among employees
• Lack of motivation to work
• Absence of employees in an unauthorised way
• Unsatisfied customers due to poor customer services
• Leakage of the revenue
• Less productivity
• Lack of proper planning of holidays

Employee Leave Management process

The management of a company is responsible for overseeing the employee's leaves according to the company's leave policy. It is required not only to comply with the law but also to improve employee morale, employee productivity, engagement, and employer branding. Leave management has three broad areas:

1. Designing of the leave policy
2. Implementation and enforcement of leave policy
3. Routine Leave administration work

Designing the employee leave policy

There are no written leave policies in many small businesses. Without properly documented leave policies, it is tough to enforce the guidelines, which becomes the primary cause of our discussed problems.

Designing a good employee leave policy requires information about the statutory rules relevant to the location of your industry. The leave policy needs to look for the business interests, employee engagement, and needs while keeping compliance in mind. Designing a leave policy requires various factors like:

1. The leave types
2. Rules for each leave type
3. The public holiday calendar for the organisation
4. The weekend policy of the organisation

The employees working in an organisation are entitled to many different types of leaves, requiring a set of different policies.

Also Read: How to Claim Relief Under Section 89(1) On Salary Arrears

Types of leaves

The government has made it mandatory for certain leaves to be provided voluntarily by the organisation. Some of the most common leave types are mentioned below:

• Earned leaves or privileged leave
• Sick leave
• Casual leave
• Leave without pay
• Bereavement leave
• Maternity leave
• Compensatory off leave

Rules for leaves

There are certain sets of rules that are developed to govern the leave policy. The rules are either set by the government or by the organisation. The rules cover many aspects like the number of leaves to be granted each year, eligibility of leaves, how frequently the leaves are to be granted, carry forwarding of the leaves, approval process, and many others.

• Public holiday calendar

The state governments declare the official public holiday list at the end of each year. Besides the paid leaves, organisations also have to give their employees around 8 to 14 holidays aligned with the list declared by the government. The entire organisation remains closed on public holidays besides the leaves that the employees take according to their convenience.

• The Weekend policy

The weekend policy is the one that defines the weekdays off for an organisation. These also need to comply with the laws passed by the state governments.  

• Admin activities in the management of leaves

The writing of the leave policies may be a one-time deal, but its enforcement is a full-time HR role. The admin is required to handle, as a part of their leave administration, the following responsibilities:

1. Accounting of leaves
2. Leave granting
3. Handling the queries of the employees
4. Advice on monthly payroll
5. Management information system reporting
6. End-year activities

• Accounting of leaves

The leave account of an employee deals with the leave balance. When compared to a bank account which only deals in bank balance, the leaves account needs to keep track of all different types of leave like sick leave, earned leave, etc. Similarly, when an employee earns a leave, the leave count goes up, and when an employee avails leave, the leave count goes down.

There are various leave transactions like grant(-), avail(-), lapse(-) and encash(-) possible which increase or decrease your leave count.

It is the HR admin’s responsibility to diligently keep a record of the leave transactions of an employee. The admin also needs to keep track of the net leave balance of the employee as the leaves balance must tally with the employee's leave transaction. Many leaves can be taken annually or monthly, but certainly, leaves have no leave balance and can be taken under specific circumstances.

• Leave granting

According to the statutory laws, the employees are entitled to a specific number of leaves for their earned leave, sick leave, etc., annually. The leave allowance is allotted for the whole year or monthly, which most companies prefer as it reduces the final settlement process when an employee decides to quit the company. If the leaves are allotted monthly, an employee may take more leave but not run out of annual leave balance. In such a case, the employer may allow the employee to overdraft and run a negative balance.

• Leave year

Many leave transactions happen in a leave year. Some companies follow the calendar year as their leave year, while some follow the financial year as their leave year.

• End-year activities

The leave balances are carried forward to the next year at the end of the year. However, there is a limit to the number of leaves that can be carried to the next year.

What happens to the leave that cannot be carried to the next year? The leaves lapse or are encashed depending on the leave policy of the company.

• Employee’s support

The employees may have many queries related to their salary or other benefits. Similarly, the employees need knowledge, information, and support to manage their leaves. Accurate reporting and services are required in such cases. Failing to do so may lead to loss of productivity or mistrust by the employee.

Loss of Pay (LOP) Advice

Employees can avail of Leave without pay in cases when they have exhausted all their leave balance but need to take leave. Many organisations work on strict timings and penalise their employees for coming late to work or being absent in an unauthorised way. Loss of Pay (LOP) or leave deduction is a type of penalty imposed. In bigger organisations, HR needs to provide LOP leave deduction advice from time to time to avoid delays in payroll processing.

What is LOP?

The full form of LOP  is loss of pay in a salary slip. It mea ns that when you don’t go to the office for two or more days without prior information, some amount will be deducted by HR from your salary.

Reporting through Management Information System

The HR administrator needs to present monthly reports through Management Information System (MIS) as a part of an excellent account-keeping practice and management control perspective. Some reports that the administrator prepares are:

• Leave transaction report for the month
• Summary report for leave
• Negative leave balance for the month
• Days leave balance
• Annual leave report
• Leave information

These reports are the statements for either a single employee or for all the employees. The analytical reports also help in identifying the leave-taking mechanism or absence. Apart from these reports, ad-hoc reports are always required.

Required tools for managing employee leaves

• Software tools

A proper information system is required for professional leave accounting and record keeping. Usage of spreadsheets, such as Microsoft Excel or Google Sheets, is the most common. It is the easiest way of keeping the records. However, to automate the process and reduce the HR administrator’s efforts, one requires purpose-built software tools. There are two categories of software for distinct users:

1. Admin tools for HR managers.
2. Self-serviced leave portals for the employees.

• The admin tools

All the different activities that are to be handled by the HR administrator are automated by the leave administration software. It also covers the rules set up, reporting the leave, keeping track of the leaves, and much more. Desktop software, online software, and cloud-based software are the different platforms from which the admin tools can be accessed.

• Self-serviced leave portals for the employees

The leave portals for employees are either an online or a mobile application, also meant for the managers. With the help of the self-serviced leave portal, employees can track their leave balance and the leave transaction. It also provides automation of the process with few added benefits. Proper leave management can make the life of an HR much easier by solving many issues in leave management. Given below are some of the advantages which an organisation can enjoy:

• Saving time for the HR administrator, the manager, and the employee.
• Higher employee satisfaction.
• Increased productivity
• The increased reputation of employer brand
• Appropriate leave accounting
• Proper leave reporting.

Also Read: How To Generate Form 16 A For Payments Other Than Salary

Conclusion      

In the 21st century, having a proper leave policy is essential for an organisation.  The HRs of an organisation are usually responsible for developing employee leave policy and maintaining an adequate track record using relevant tools. We hope that through this article, we have presented the different types of leaves in HR and help you understand the leave policy for employees. 

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