Updated: Jul 9
Beyond employees’ pay there are hidden costs to employing people. The cost of annual leave is one of these. How much does annual leave cost your business?
The obvious cost of employing workers at any business is their wages, along with the payroll taxes they generate, for each employee, though, there are other expenses. One of the largest of these costs is staff holiday, sickness and other absence. Many business leaders though aren’t aware what annual leave is costing them, so let’s take a look.
What is the cost?
While some employment costs appear plainly on your monthly payroll figures, the cost of annual leave can often hide in plain sight. The easiest cost of annual leave to see is holiday pay, which, again, is there for you to see in the payroll. The other costs are harder to spot, because some of them cost you time, rather than cash.
Each holiday application an employee makes needs to be approved by management or HR. This takes up the time of a supervisor, looking at the worker’s remaining allowance, leave booked by other staff and the schedule of the company before approving or denying the request.
The holiday then needs to be recorded, and the days deducted from the employee’s entitlement, to make sure they do not take too much paid time off. A decision also has to be made as to whether the worker needs to be replaced, with agency staff or overtime, or if the rest of the team will work short handed.
These processes all take time, which could be spent on other tasks, costing your business money. For unplanned absences such as sickness, the time taken is more pronounced, as it cannot be planned in advance. Administrators also pay a cost of annual leave in the time they spend calculating holiday entitlements for part time staff or employees joining or leaving the company midway through the year. Put together, these costs add up to hundreds of pounds per employee every year, ignoring the wages paid as holiday pay.
Is there another way?
The only effective way to reduce the hidden cost of annual leave is to reduce the time you spend administering it. Most companies using spreadsheets or paper-based systems find that there are very few ways to do this. With these systems some manual step is needed to record each application or absence.
Far better, faster and therefore cheaper is to change to a purpose built, customisable and automated system to manage your annual leave and absence. By removing time-consuming manual entries and calculations, you can drastically reduce the cost of annual leave.
LeaveWizard offers companies of all sizes a purpose-built, customisable, cloud based annual leave and absence management system. With online applications and approvals, automatic tracking and analytics, and instant, accurate pro rata calculations, LeaveWizard users save an average of 10 hours per employee per year administering annual leave. Factor in the typical salary of the administrator and the cost of annual leave falls by hundreds of pounds per employee every year.