Accumulation of leave has major cost implications for SA companies

As we move towards the year-end holiday season, many companies are preparing for a shut down period and are grappling with the issue of employees’ annual leave and specifically the accumulation of leave. Accumulated leave continues to be a major liability for South African organisations, says René Richter, Associate Director for Research at PwC. The prevalence of leave accumulation is diminishing as companies struggle with the cost implications from a balance sheet perspective as reported in the 2011 PwC South African Employee Benefits Guide issued today.

The 2011 benefits guide is based on the data submitted by 51 companies across a broad spectrum of industries. The research was carried out between August and September 2011.

The majority of companies (96%) taking part in the PwC benefits guide, grant annual leave on the basis of working days. The average number of working days leave granted by organisations for senior management is 20 days per annum. The number of days leave granted for top management, executives and expatriates tends to be marginally higher, with the maximum being 30 days.

The highest number of 37 annual leave days was recorded for expatriates, which is not surprising based on the type of employment and the number of days that the incumbent will require to visit their home countries, says Richter. She says that a number of companies were not able to reflect the policy for their expatriates as this was administered by the home country and could be different depending on the policy in that jurisdiction.

A significant percentage (69%) of organisations reported that additional leave is provided based on an employee’s number of years of service with a company. In some companies additional leave was granted based on something “other” than years of service. In these instances, the allocation was usually grade or job based, says Richter.

The majority of organisations (88%) reported that only a portion of the annual leave can be accumulated. The number of working days that can be accumulated range between five per annum up to a maximum cap of 30 days. Less than half (43%) of organisations allow their employees to be paid out accumulated leave.  Richter says that a number of companies have policies in place which clearly stipulate that no leave, whether accumulated or not, will be paid out to an employee at any time other than an exit from the company.  In these cases the organisation will limit the number of days and it will be managed on a use or lose basis.