It’s a typical scenario for many business owners. An employee puts in an application for annual leave for a tropical break to Hawaii. You smile as you put yourself in their shoes imagining yourself lying on the beach with a cocktail and then reality hits and you start to think how it will impact you and your business. Your immediate concern is having the manpower to cover your absent employee but there are many other factors that you also need to consider. These include the following six areas.
Six Questions To Keep In Mind With Staff Annual Leave
1. Increased wages? Will you have increased wages due to the need to hire a casual replacement or pay current staff overtime rates?
2. Is it over four weeks? How many weeks has the employee accumulated? If it is over four weeks you may end up paying holiday leave at a higher rate to that when the employee earned it.
3. Is leave loading applicable? Are you required to pay leave loading?
4. Are your calculations correct? Have you correctly calculated the actual leave entitlement in days and dollar value?
5. Is your tax up to scratch? Have you applied the correct tax?
6. What about unused leave? Are you required to calculate a provision for any unused Leave in the accounts of the business?
Do You Know What Your Liabilities Are?
The factors above may put considerable pressure on a business’ cash flow if they are not addressed. It’s important that you are aware at all times of your employees’ entitlements. If you do not have a provision for leave entitlements in your financial statements or records then how do you know what your liability is?
Annual leave and Long Service Leave entitlements may vary from state to state and depend on any Workplace Agreements that may be in place. You should ensure that you are using the correct governing legislation or agreement when calculating leave entitlements. The differences in these mainly relate to Long Service Leave, they are associated with quantity and time i.e: when do the obligations to accumulate Long Service Leave begin and how many weeks is the employee entitled to.
Plan Now And Avoid Future Pressure-Cooker Situations
Do you know what employee leave will cost you in the next 12 months? And if not how can you expect to take that well-earned break that you have been dreaming about.
Our Business Advisory team can help you reach your preferred holiday destination stress free. We are happy to assist you should you have any questions or concerns regarding your leave obligations.
Contact Sally Colquhourn, at RSM Australia, on 02 6217 0323 or [email protected]
