April 23, 2021 by Satabdi Mukherjee

Risks of an Inefficient Leave Management Process


Risks of an Inefficient Leave Management Process

Inefficient Leave Management Process

One of the main responsibilities of the HR department is the leave management process. An ineffective leave management process has wide-ranging effects--both on business continuity and on employee morale and productivity.

A leave management process is a set of policies that govern time-off requests, such as sick leave, vacation days, maternal leave, and so on. Thus, it’s also called a time-off management process.

Don’t underestimate how quickly employees get irritated with faulty payroll processing or messed up leave balances. Mismanaged leaves can also land a crucial project in trouble, hampering business.

Let’s take a detailed look at some of the risks of an inefficient leave management process:

1. Higher costs

There are many ways in which your business could be leaking money due to inefficient leave management.

The cost of processing each employee’s leaves and updating changes may seem small when seen in isolation. But add up the amounts for all employees and the figure will balloon significantly.

You should also consider the cost of rectifying human error in manual leave management systems.

2. Mismanaged staffing

An inefficient leave management system will not give you an accurate picture of how many employees are on leave at a given time or which employees are on leave or scheduled to go on leave.

You may approve more leaves than what your business can reasonably handle and important projects may suffer.

Many companies hire more people than necessary to prevent a skill shortage. But this phenomenon, called overstaffing, is an added cost.

3. Legal risks

Each country has a certain set of rules and regulations around leaves.

Without an effective leave management software, you may unknowingly be non-compliant and be forced to pay fines when served with a legal notice. Any changes to the law can be quickly updated in the system.

Thus, a leave management tool automates the grunt work for managers and supervisors, allowing them to focus on business-critical tasks.

Legal risks

4. Lower employee morale

If employees do not get leaves approved when they need it because your leave management process is a mess and your leave policies are not clear, it will have a significant impact on employee morale.

A low morale causes employee dissatisfaction and loss of interest at work. They are more likely to quit, generating greater costs for you in terms of hiring and training new people.

An efficient leave management system allows managers to systematically approve leaves, clearly communicate leave policies, and even auto-approve certain leaves.

A smooth leave management workflow builds trust between you and your employees, ensuring that they give their best at work. It shows that you care for your employees--an important factor especially in the current stressful COVID-19 pandemic.

5. Difficulty reconciling leaves

If you’re still depending on spreadsheets--or worse--registers to record in-time and out-time as proof of attendance and leave, you should stop.

Such manual systems make it difficult to furnish proof when an employee argues with you about his/her leaves. This translates to greater costs for your business.

If you’re a small company and you’re not recording leaves because you think you can remember how many leaves an employee took, you may be underestimating the number of leaves taken. This can cause problems further down the line in terms of payroll management and additional leave approvals.

How can you avoid these risks to your business?

You can use an efficient leave management solution like Perk Payroll to optimize your leave management process. Get rid of your spreadsheets forever!

Some of the salient features of Perk Payroll are:

  • Configuration of leave policies based on employee levels
  • Creation of different categories of leaves
  • Generation of detailed reports such as leave statements and employee leave summaries
  • Setting up of multi-stage leave approvals
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