5 risks of an ineffective leave management process

Leave management is one of the key responsibilities of the HR department. Lack of it or an ineffective leave 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 has suddenly disappeared on vacation planned long before.

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. What can go wrong?

Apparently – everything, with all the consequences described below.

1. Higher costs

Putting it simply – every business process done ineffectively generates higher costs. And so it is with the ineffective leave management process. There are at least aspects of it that can be cost-generating:

• The man-hours used to process a single employee leave – there is a need both on an employee side and the HR department. Every minute wasted in ineffective leave management is a minute of work lost. Apparently taking a break instead of sending emails and processing the printed docs is a better choice for the company.
• The man-hours wasted on getting up-to-date information – every manager needs to stay informed about his or her staff availability. Constant checking if there is enough workforce for an upcoming project or increased traffic of customers is both frustrating and time-consuming.
• Costs of mistakes done in the process – every manual work-based process is prone to errors. Considering that, the hidden mistake within the spreadsheet or a notebook with all leave requests is waiting to burst out in the least expected moment – right before the deadline or during the highest customer traffic. Facing the understaffing in such a moment is a straight way to losing profits and reduced customer satisfaction.

Considering all the above, an ineffective leave management process is way more expensive than implementing any leave management system one can imagine.

2. Inaccurate staffing

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 point of view, 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 either outsource the skill or hire an individual with the 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 when 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 of them in a critical situation. Although reasonable, this strategy leads to overstaffing. And overstaffing is a cost itself.

3. Legal risks

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.

Moreover, when there is an ineffective leave management process in the company, rules can be broken by an accident or an overlook.

Also, the company needs to deal with multiple types of leaves – paid leaves, unpaid 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.

4. Reduced morale

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 job seekers look for transparency in their new working place. Unengaged employees are not working hard and are actively looking for a new job. Both situations lead to a tremendous cost increase as people are leaving.

5. Mess spreads in the company

Last but not least, the ineffective leave management process leads to the mess in the days off in the company. The employees don’t know if every one of them has the same amount of free days to take, some taking a day off every week while others working overtime.

The mess in the leave days is a quick summary of all issues described above – the source of higher costs or inaccurate staffing, the core of legal risks faced by the company, and the basis of the reduced morale.

Due to the high impact of human resources management in the company, the mess in the HR department easily spreads to the rest of the organization. It affects the project’s delivery by a lack of information about the employees’ availability, resulting in a mess. It creates a disorder in nearly every other department.

In the end, the company is operating day-to-day, struggling to fight the chaos within.

Summary

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 talk about the issues with leave management or how to make them better in your company, just contact us.