Annual leave bottleneck could cost UK SMEs £1,022 per employee

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SMEs could be looking at a bill of up to £255,500 if employees don’t take their annual leave allowance this year, research by coworking company Instant Offices has revealed

The huge cost is based on the average UK salary, accounting for companies with 250 employees or more taking 10 days leave which equates to half of their overall allowance.

This would cost employers £1,022 per employee.

If employers honour too many leave requests Instant Offices warned that it could lead to operational failure.

Government legislation has been introduced for statutory holiday to be allowed to be carried over for two years to help alleviate some of the cost.

Yet Lucinda Pullinger, global head of HR at real estate company The Instant Group, told HR magazine, the legislation does not currently solve the issue for all businesses.

She said: “Employers must still be mindful that if not managed correctly, annual leave bottlenecks can put unnecessary strain on operations and become costly if employees resign.”

As a result of the potential risk to business, with possible redundancies down the line, employment lawyers advise employers to encourage staff, both furloughed and at work, to take holidays during this time.

Speaking to HR magazine, Rachel Kendall, associate in the employment team at Kemp Little, said: “An employer does have the right to compel employees to take holiday by a particular date. Employers do not have to give specific dates on which an employee must take holiday, but can instead specify a period within which the holiday must be taken provided that they give sufficient notice to the employee.”

This is the approach many employers are taking, Kendall said.

She added: “This approach avoids the accrual of holiday becoming a burden on business during subsequent financial periods when employers are hoping for workloads to improve, however it doesn’t always go down well with the employees.”

However, Pullinger argued that the importance of annual leave as a wellbeing benefit should not be forgotten. She said: “Just because we are unable to take destination holidays that we hope for, it doesn’t mean we don’t need a change of pace.

"COVID-19 and lockdowns have put extreme pressure onto many people; whether that be around health concerns, financial concerns, juggling work with young children at home, and isolation, to name just the obvious ones.

“Businesses should be reminding and encouraging their workforce to take time off, even during lockdown. While we may not have the holidays and breaks that we had planned, regular breaks are crucial for our mental and physical health."

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