Payroll

Staff Annual Leave, Do Not Overlook The Inherent Risk!

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Does your Staff Hand Book or your HR Policy have any mention on the forfeiture of unconsumed staff annual leaves at end of the year?

I recently came across a prospect who asked me how he should deal with a staff whom he just retrenched, the former is now asking to encash the balance of all his unconsumed annual leaves.

As far as the Employment Act is concerned, annual leave is just an entitlement. If we read the Act as it is, it means Annual Leave is an entitlement which will be forfeited if not consumed at end of the year.

Some companies are kind, they would allow staff to carry forward their unconsumed annual leaves to the following year.

For other companies, they may just allow a few days to be carried forward to the following year with a prescribed expiry date for their consumption, beyond which will be forfeited.

Imagine, if you are thinking to exit your business via Trade Sale one day in the future, and if the potential buyer is smart enough to have spotted this flaw in your HR policy matter, and that you have staff who are with you for more than 10 years ! This potential buyer would use that as a Discounting Factor to “negotiate” with you to arrive at his version of he business valuation of your business, which you would not be able to object.

Be smart, insert a clause inside your HR Policy or Staff Hand Book to either restrict carrying forward of any unconsumed staff leaves or forfeit them at the end of every calendar year.

Be even smarter to even ensure all your staff sign off as evidence they have read your revised policy. It is not enough to just issue them an email or a policy document. Your staff can claim that they are not informed as they have not received your email. It will be worse if your staff are neither desk bound nor office bound, as they may be retail or production staff.

Encourage your staff to plan their annual leave as a form of portraying you are supporting “Work-Life Balance”

If you need help, feel free to contact us at :

(O) +65 63851011

(M) +65 90880669

(E) [email protected]

www.corporatebackoffice.com.sg

Written by Kelvin Loh