Company's Fascination over Large Leave Balances

random12 on 07/12/2021 - 20:45

One thing I have never quite understood is why company's are so worried about large leave balances, and more so during COVID.

Hasn't anyone taken a class in accounting? The expense is recognised when the work is done, not when the leave is taken. The fact that a company has $x in leave liability means nothing, because they also have $x on the asset side of the balance sheet in cash that would have to be paid if employees took all their leave today.

The only time I can see it making a difference is if an employee gets a raise. Say they go from $50k to $60k, that means the value of the leave has increased by 20%. But other than that, there is no difference. Or its that increase that they all worry about? If that is the case, why don't they build into contracts that leave balances translate into an equivalent $ amount on job changes?

Education & Work

Comments

  • stringbean402 on 10/12/2021 - 06:53

    Also don't forget the value of the liability goes up over time.

    In 2018 Jane earns $52,000 p/a - leave liability = $4000 p/a
    In 2019 Jane gets a pay rise and now earns $76,000 p/a - leave liability = $5,846 p/a

    If Jane was allowed to accumulate 8 weeks of accrued annual leave and carry it over the liability on the balance sheet has increased and is now $3,692 more than it otherwise would have been.

  • boredrandom on 10/12/2021 - 08:38

    I've read through the responses and seems like most people are talking about the liabilities side being bad for the company.
    The other thing to consider as a company is the profit and loss statement. A person taking more leave than they accrue in the month would decrease that month's salary expenses (compared to a regular month), since it reduces the leave liability instetead of increasing salaries expense for the month.
    If companies want to improve their P&L at the end of the year, they can also encourage people to take leave to do this.

  • ensanguined on 10/12/2021 - 08:57

    OPs answers are absolutely hilarious. Troll post?

  • Homr on 10/12/2021 - 09:56

    Can't believe no one has mentioned this. Keep in mind that if you resign and have tons of leave accrued, your employer is not obligated to pay super on those leave paid out. So that's good news to employer and bad news to employee

    • admira on 10/12/2021 - 15:30

      Was mentioned quite a few times in threads above. I have to say it was news to me!

  • Vote for Pedro on 10/12/2021 - 10:14
    +3

    Annual leave balances are a higher return than online savings accounts (mostly).

  • No ONE on 10/12/2021 - 14:23

    mostly because of cash flow and business operations.

  • [Deactivated] on 10/12/2021 - 18:35
    +3

    Start a company and don't worry about your employee's leave balances. See how that works for you.

  • djmm on 10/12/2021 - 18:58

    Company also started to force you to take your long service leave. Not sure the legality of this.

    • bohn on 11/12/2021 - 15:07

      they can easily force you to take long service leave as long as they give the appropriate notice.
      I know of a few work places who are being nazis on annual leave, but not one of them is insisting on LSL being taken.

    • gromit on 11/12/2021 - 17:34

      Perfectly legal. It is why if you have a big bank of LSL you should consider taking it if the business is not very solid as in a downturn or quiet period they can force you to take it whether you want to or not.

  • Dodgy Bob on 10/12/2021 - 23:08

    I can't believe no-one has mentioned leave loading!

    Wage growth might not always keep up with inflation but it will almost certainly outpace the miniscule return you'll get from an at call cash account. Add the compounding impact of leave loading that many Awards/EBAs provide for and OP is losing money on their "interest free loan".

    Not to mention that if the company does need to replace staff on extended leave they will almost certainly be paying a significant premium for their temporary hire.

  • GrueHunter on 11/12/2021 - 10:24
    +2

    Hasn't anyone taken a class in accounting?

    Tell us more about your extensive accounting qualifications

  • LoserScott on 11/12/2021 - 21:18

    Wouldn't it be good if you could:

    Work two jobs for over the course of two or 3 days,
    Both in day and night, do the respective hours (similar to fifo work, or Uber, or what ever but the points to minimise the 9-5 rol, or 9-6roll)
    And have 4 days to your self, while earning that cash for those extra hours while spending time with family.

    Meaning the employer back pays you on a two week day, or month

    Job security's non existent and this would not pay the mortgage.

    The company just pays you for the hours, but the problems finding a job that falls in that line, yes taking two shifts would help but if it's a physical labor job you'll need some down turn for recovery before burning out.

    Anyone done this before?

  • nikey2k27 on 12/12/2021 - 00:33

    The only time I can see it making a difference is if an employee gets a raise. Say they go from $50k to $60k, that means the value of the leave has increased by 20%. But other than that, there is no difference. This is why my boss has the same problem told staff after covid leave cannot be take on mass like in old days and reason why we shut down for 2 weeks at Christmas again this year post covid we never do that stuff.

  • oO0Dam0Oo on 12/12/2021 - 08:40

    So in summary it really depends on the scenario.

    1). Business as usual
    2). Employee planing to leave
    3). Company going out of business
    4). If company has to engage temp staff to cover your position during leave.
    5). Any wage increases.

    One example:

    Scenario: Employee banked leave for 12 months and is planing to quit.

    Assume staff member banked all leave. Over the course of a year the companies wage expenditure is greater than had that employee taken leave (assuming no temp staff required in event of leave being taken). 52 weeks paid + 4 weeks accumulated leave hours. 52 vs 56 weeks payable wages (7.6% increase in wages).

    Potential savings to company if employee quits through not having to pay super is 10.5% on any untaken leave.

    No net benefit to employee at the expense of a holiday. 2.9% savings to company which is minimal.

    I could be wrong… feedback welcome.

  • DemocracyManifest on 08/03/2022 - 10:33

    Lol I don’t even have to read this to know this is Coles 😂

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