Discover how a CFO can reduce cost by managing excessive leave balances in their company. Learn how to educate employees, define mandatory leave periods and how to communicate a policy internally
Alex Millar, CPA
Published
August 25, 2023
Managing excessive leave can be a delicate task for CFOs and finance teams. For some people, work is life, and no policy can persuade them to take a break. For companies looking at reducing spend and keeping costs under control, it can have a profound financial impact. Over numerous years, an employee can accumulate a colossal leave balance. In most cases, the company has no strategy on how they can reduce it.
Why managing excess leave is vital for a CFO
Improved Employee Productivity and Well-Being: Employees who take regular time off are more likely to be engaged, motivated, and less prone to burnout.
Reducing Balance Sheet and Cash Flow Risk: When an employee gets a pay rise, the value of their leave also grows. If this is not monitored, the company will pay out more than what’s recorded in its balance sheet.
Reducing Internal Fraud Risk: This can arise when long-standing employees potentially partake in fraudulent activities. When employees take leave, their actions could be uncovered, jeopardizing their position and the company’s reputation.
What steps can a CFO take to get unused leave under control?
Handle Legacy Issues: The first step is to address employees with excessive balances. If you can handle the impact on the cash flow, payout part or all of the excess leave to give the employee a fresh start.
Establish Mandatory Periods for Leave: Encourage employees to take leave and establish mandatory periods when everyone must take time off. This ensures a minimum number of weeks are taken each year.
Use Expiry Periods: Put expiry dates on industry-specific types of leave e.g. a day in lieu. You can make this favorable for employees by using leave with an expiry before annual leave days. Each jurisdiction has rules, so you must check what’s legal.
Communication of Policy: The policy must be clearly explained and visible to employees.
Education of Benefits: Help employees understand the benefits of taking leave. Ensure everyone knows the importance of taking time off and the financial implications for the business.
Management Leading by Example: Encourage managers and leaders to take their leave, demonstrating the importance of work-life balance and setting a positive example for the rest of the company.
Monitor and Setup Alerts: Implement a system that provides timely notifications to management, allowing them to address excessive leave before it becomes problematic.
Ensuring CFOs Keep Costs Under Control
Establishing processes and rules for excessive leave and other critical business parts is vital to reduce spending. Software is another concern area for CFOs where costs can get out of control.
If you’re wondering where you’re overspending on SaaS. Get started for free with Hudled and request a SaaS audit to see where you’re overspending.
