I came across an interesting debate on LinkedIn this week on the pros and cons of starting the holiday absence year at different periods of the year.
Since it’s topic we often discuss with our customers, we thought we’d pitch in with our views—and some insight into how the Cezanne HR system can help make managing any kind of holiday year a whole lot easier!
Employee start date
PROS: This can be an attractive option for a number of reasons. You don’t have all of your employees clamouring to use up left-over holiday entitlement at the same time, and keeping on top of the individual calculations may be simpler (particularly when hiring new employees), as you don’t have to worry about calculating pro-rata entitlements based on the company holiday year. FYI, for any UK employee (starting work after 1st October 1998), if you don’t specify the dates for calculating holiday entitlement in their contract, then the first day they start in a job automatically becomes the default date used for calculating their entitlement to paid holiday.
CONS: With no single date by which employees need to use up their holiday entitlements, it’s difficult keep track of who still has time left before the end of ‘their’ year. This is challenging for HR, who may be tasked with ensuring that employees take the legal minimal entitlements, and for line mangers needing to make best use of resources. If Fred has 5 days to use up before the end of June, but Julie still has 10 days and her holiday year ends in April, how do you know who to allocate to a project kicking off in March?
There’s also the tricky issue of Bank Holidays that don’t fall on consistent dates each year – like Easter and Christmas. Depending on how your employment contract is worded, you may find yourself having to award extra days, or grant extra time to employees who miss out on Bank Holiday entitlements that other employees automatically get. Take a look at this blog to find out more.
SOLUTION: If you do decide to go for this option, Cezanne HR will automatically calculate holiday entitlements based on individual employee start dates, and make sure you don’t fall foul of Bank Holiday mix ups either. It won’t solve all of the resourcing challenges, but line managers will be able to see individual team entitlements, days taken and days still to be booked – as well as team calendars – which should make their lives a little easier.
Calendar year: 1st January to 31st December
PROS: It’s a nice tidy solution that everyone can understand, and it is pretty straight forward for HR and line managers to keep on top off entitlements, even if they’ve not got an HR system doing the hard work for them.
CONS: This plan can leave employees in a rush to use up their remaining entitlements over the Christmas holiday season, which may leave your business short-handed if it’s not carefully managed.
SOLUTION: Planning and communication is essential here. With Cezanne HR, line managers or HR can easily check who has holiday still to book or take. Additionally, they can also make use of visual calendars that include information about other absences, such as training, jury service or parental leave, to ensure they have appropriate cover. That means they’ll be able to nudge team members into booking holiday in plenty of time, therefore allowing better overall planning.
Financial year: 1st April to 31st March
PROS: This approach is becoming especially popular with companies whose finance teams are looking to comply with the new reporting requirements of FRS 102. The thinking behind this is that while you do not normally pay your employees for holiday they do not take, you would be required to do so if an employment were terminated. This means that under FRS 102, leave that’s been accrued and not used should be accounted for as a liability. By aligning your holiday year with the fiscal year, it can make financial reporting more straight forward.
CONS: You’ll have the same issue with the Easter Bank Holiday and you might with Christmas and New Years. Since Easter is often a peak holiday time for families, you could get flooded with requests.
SOLUTION: Cezanne HR can help in two ways. Firstly, you can run reports showing when employees joined, what entitlement they’ll have accrued at the end of the financial year, how much they’ve booked and what still remains to be booked, so that finance can take this into account in their reporting. Secondly, if you do decide to align your holiday year with the financial year, Cezanne HR can help make the migration to a new approach straight forward.
Summer year: 1st July to 30 June
PROS: Setting the holiday year to start and end at some point during the summer has the advantage of letting UK employees use up remaining holiday at a time when there is a chance of the weather being good. Anecdotal reports suggest it smooths out some of the backlog issues.
CONS: Ending the holiday year close to the school summer holidays doesn’t work for everyone – especially parents or carers that have booked the traditional two-week August break, but kept days in hand in case of emergencies. They can end up having to take a lot of time off at once. Allowing some degree of carryover could smooth this problem.
SOLUTION: At the end of the day, it’s about selecting the approach that works best for your business. The good news is that with Cezanne HR, which ever approach you currently use, you don’t need to worry about manually calculating holiday entitlements based on when the year starts, when the bank holidays fall, or even the hours your employees work; or running reports to help with resourcing or financial reporting. It’s even easy to manage different holiday rules within the same company, or take into account overseas requirements – like accruing PTO on a monthly basis for the US, or starting the calculation of the working week from a Sunday.
Cezanne HR is set up to make this simple for you. You can find out more about the Absence module here.