Leave management is one of the key responsibilities of the HR department. Lack of it or an ineffective leave policies and management process can have disastrous consequences.
With employees’ skills and knowledge being crucial assets in delivering the project. Leave management can be a game-changer, especially if there is a sudden shortage of a crucial skill or a key employee takes leave – go on vacation planned long before or unexpected sick leave.
On the other hand, though, the leave management process seems easy at first glance – one needs only to keep all the information in an online timesheet and make sure it is up-to-date. If the effective leave management system is so easy to upkeep, what can go wrong?
Apparently – everything, with all the consequences described below.
Putting it simply – every business process done ineffectively generates higher costs. And so it is with the ineffective leave management process, as leave and attendance are one. There are at least three aspects of it that can be cost-generating for many organizations and businesses:
Considering all the above, an ineffective leave management process is costly. Implementing a leave management system can help tremendously, both employees and managers.
It is just another side of a coin when it comes to higher costs. There are “resources” in “Human Resources” for a reason – every employee delivers value by their work, contributing to the common goal, be that serving meals for customers, delivering software, construction of a building, or basically anything one can imagine.
From the business process perspective, there is a pool of talents and skills within the organization. It is both a cost and an asset. According to The State of Talent Optimization 2020 report, 64% of all company costs are labor costs. On the other hand, though, the report highlights that execs attribute 72% of the company’s value to the employees.
If there is a skill shortage, companies can outsource the skill, start hiring and training an individual with potential or find specialists with required talents. Usually, hiring makes the skill more available than outsourcing. But with an ineffective leave management process, the company can end up in a situation in which there is an employee with the desired skill but well… not now.
To avoid this risk, companies hire multiple individuals who share competence and skills, to never run off out of them in a critical situation. Although reasonable, this strategy leads to overstaffing. And overstaffing is a cost itself. Inexperienced employees take space that could be taken by an experienced specialist, and many leaves anyway!
In nearly every country in the world, there is a legal framework for employee-employer relations. These include the rules about the work time, leaves, and time-off that needs to be respected by the employer. Abusing the rules leads not only to the legal consequences, but also ruins the reputation of the company. And that would hurt the staffing process even more – according to the BetterTeam data, 50% of employees wouldn’t work for a company with a bad reputation, even if they got a pay rise. Employees may leave right away, almost in real-time.
Moreover, when there is an ineffective leave management process in the company, rules can be broken accidentally or oversight. Some employees may actively violate the company's policies by choosing to go on leave without remembering how many days they have remaining. This use of sick leave due to poor tracking disrupts the ability to maintain an accurate picture of how many employees are on leave at any given time. Additionally, leave approval can cause problems when managers lack visibility into individual leave balances, leading to unauthorized absences and administrative challenges. Consequently, the employee tends to exploit these gaps, further complicating the leave management system and increasing the risk of compliance issues.
Besides, the company and its HR department needs to deal with different types of leaves and leave approvals – paid leaves, unpaid leaves, parental leaves maternity leave, and other types that are specific to the local market or a company. The challenge comes when there is a need to manage a multinational team with various legal frameworks and local holidays that entitle one to take a day off.
Without a leave management system, the company can easily get lost in the process and unwillingly abuse its employees’ rights. Picture of how many employees can leave at any given time. Optimize your leave management process, and you won't have to deal with all of that.
Considering all the above, the company that has an ineffective leave management process creates a great deal of uncertainty and tension in the staff. Apparently, there is no good way to know are there any days off left, how many of them or were the requested leave days accepted.
The lack of transparency and clear rules to follow create a culture of disengagement and distrust. And it is a straight way to ruin employee engagement and morale. According to the Glassdoor report, 90% of jobseekers look for transparency in their new working place. Employees who are dissatisfied and unengaged are not working hard and are actively looking for a new job. Both situations lead to a tremendous cost increase as people are leaving. Many companies suffer from situations like that regularly.
Many companies suffer from an inefficient leave management process, leading to chaos in employee days off. Without proper leave tracking, employees don’t know their leave balances, resulting in some taking excessive use of sick leave while others are forced to work overtime. This lack of clarity causes employees to actively violate leave policies, increasing the total for all employees and complicating payroll management.
The disorganization in leave days summarizes all previously described issues – higher costs due to payroll management errors, inaccurate staffing from poor leave tracking, legal risks from non-compliance, and decreased employee engagement. Examples of sick leave abuse emerge when the leave management process is inefficient, creating evidence when an employee disputes their leave records.
Due to the significant impact of human resources management, the mess in the HR department easily spreads to the rest of the organization. Employees who are dissatisfied with the leave management system may experience drops in productivity and employee morale, affecting project delivery by causing uncertainty about employee availability. This lack of information leads to unnecessary hiring and training new employees, further increasing costs and reducing overall productivity.
In the end, the company operates day-to-day, struggling to manage the chaos within. Without an efficient leave management system to help streamline leave tracking and balance leave requests, the disorder grows, consuming a big chunk of revenue and also decreasing employee engagement. No business owner wants this, as it not only costs a company financially, but also harms the work environment and productivity.
An ineffective leave management process hurts business in many, sometimes unexpected, ways. But with the modern, cloud-based tools to manage the leaves in the company, making the process clear and straightforward becomes easier.
In Calamari, we are dedicated to improving the business processes regarding HR, leave management, and attendance tracking. If you wish to discuss the issues with leave management or how to improve them in your company, just contact us.
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