Large amounts of unused employee annual leave can be a huge financial strain for businesses. If an employee decides to resign, desiring to take annual leave as part of final payment, or they want to take their built-up leave all at once for an extended holiday, it has can potentially leave a business owner in a vulnerable financial position.
Here we discuss if you can force an employee to take annual leave, and provide suggestions on how to handle this tricky situation.
What is excessive annual leave?
Every employee in New Zealand gets at least four weeks of paid annual leave each year, (except casual and some fixed term employees). Annual leave is intended to give staff a chance to rest and relax away from work.
Although employees start accruing leave from their first day of work, the entitlement to take annual leave in NZ comes into effect after 12 months of employment, unless you wish to allow employees to take leave in advance.
How to discuss forced annual leave
As a business owner with multiple employees, it’s always best to reach out to your employee in the first instance. Making time for a good-natured chat about the leave entitlements could resolve the issue, as most issues can be solved with an amicable discussion. Genuinely having a desire to reach a mutual agreement together is the best way to approach the delicate subject of excessive amounts of annual leave.
How do I direct an employee to take their annual leave?
If after you have consulted with your employee and you just cannot agree on when the annual leave is to be taken, then you can direct the employee to take their leave. You must do this with 14 days’ notice to the employee to be legally compliant. You can also require employees to take annual leave if you regularly closedown for a particular period every year, such as over the Christmas and New Year break. Remember, you also need to give 14 days’ notice in this case as well.
Directing an employee to use excessive annual leave
A direction to take annual leave must be in a written form, such as an email or letter, providing the employee with 14 days’ notice. As a business owner, it’s important to handle excessive annual leave sooner rather than later, as this heavily built-up leave can be a financial liability. It can leave you short-staffed if employees decide to take their leave in a long chunk, or if they hand in their notice, (cashing out the annual leave).
Next steps
Encouraging your employees to take long weekends off, even short mini-breaks can help your business avoid a bottle-neck of future leave requests. This may reassure you as a business owner that financial liabilities are being reduced, and that productivity is maintained as employee mental health is boosted with well-deserved time off from work. Remember, talking to employees is the first step to finding a mutual agreement over any excessive unused annual leave entitlements.
Tailored HR for you
With years of experience in employment relations, Peninsula is committed to supporting New Zealand businesses. Our managed hr services are tailored for your industry, business, and staff needs. Chat with our team today to get all your tricky annual leave questions answered.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.