Paymaster Magazine

5 reasons why inaccurate leave-record administration will cost you money …and the likely loss of your good payroll reputation too

Inaccurate management and administration of employees’ leave records could have damaging consequences for your organisation. Generally speaking, (in the world of business), calculated risk is good, but taking foolish risks remains an unwise practice to pursue.

Employee leave is governed by a set of legislated ‘basic conditions’ — laws embedded within the statutes of the BCEA

The BCEA determines the basic conditions (i.e. minimums) for most issues and situations relevant to employee leave. These include the conditions surrounding daily and weekly rest periods, night time work, Sunday and Public holiday work, annual leave, sick leave, maternity leave, family responsibility leave, unpaid leave and absence without leave.

Certain administrative obligations rest with the employer too — for example, when paying over an employee’s weekly/monthly pay, the employer must provide verifiable information (in hard copy or digital format) outlining their remuneration calculation/s, any allowable deductions and the time worked for the period.

 Businesses continue to take foolish risks — employers don’t recognise precision leave administration principles as a critically important operational imperative

Speaking from a wealth of experience within the HR and payroll industry, Ian Hurst, CEO of Paymaster Payroll Services, says that “despite untold compelling reasons that ought to convince business owners to ‘get their house in order’ [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][when it comes to HR and payroll operations], they repeatedly fail to do so”. Seemingly, many business owners prefer to knowingly (or unknowingly) take foolish risks with their internal HR and payroll processes.

Hurst, recounting his extensive set of past experiences in the labour relations environment, has identified 5 primary reasons why inaccurate leave-record administration (within the payroll and HR functions) has resulted in financial losses for companies, …and in some cases, has even resulted in a company’s downfall and subsequent closure.

1)    Employees may take leave in excess of that which they are entitled to — you are exposed to deliberate and/or unintentional employee fraud

The permutations outlining the countless ways in which excessive leave can be taken are too many to list. However, to name but one example, in some cases an organisation may be required to keep accurate track of employee leave taken during its mandatory year-end shutdown period — the period when a company ‘shuts down’ all its business activities during the December/January holiday season.

In a case such as this, the employer is entitled to stipulate that annual leave must coincide with the shutdown period. However, should an employee take their annual leave at another time during the year, then the shutdown period will be treated as unpaid leave. This presents a payroll with several administrative challenges.

For the discerning reader, a scenario such as this serves well to lay bare the kind of interpersonal complexities that might arise when an employer attempts to equitably manage a shutdown leave period for a significant complement of staff.

Consequently, for this article, let us avoid opening the bigger can of worms which sick-leave stands to present an employer with: myriad factors — including sick-leave certificates (with or without), maternity regulations, injuries on duty, etc. The permutations alone get sufficiently complex enough to warrant a dedicated future article (ed. watch this space) to suitably address the many complexities and abuses that sick-leave, on past occasions, has presented employers within the HR and payroll fraternity with.

2)    Upon employee resignation, the employer pays out too much leave compensation — you are at risk of incurring financial losses

If an employee has given notice (upon resignation but not termination) the employer may not force an employee to take leave during the notice period being served. Complications arise when prohibitions—in terms of section 20 (11) of the BCEA[1]—prevent the employer from paying an employee for annual leave. This illustrates how complexities within the domain of HR and payroll administration can turn out to be a rather involved process to keep track of, particularly when manually administered and managed.

 3)    Poor administration is a poor reflection of your HR and payroll department — it reflects incompetence, plus, line management loses faith in the support function

In terms of section 20 (4)[2] of the BCEA, annual leave ‘carry overs’ from one cycle to the next, an employee may (in some cases) demand that his/her leave may be taken. However, complexities and previous legal case history, demonstrate that there is no easy, cut and dried set of prescribed conditions surrounding several aspects relevant to employee leave carry overs.

Monique Jefferson of Bowman Gilfillan attorneys, highlights one of the legal paradoxes that exists in this regard —

In Jooste v Kohler Packaging Limited (2004) 25 ILJ 121 (LC) the Labour Court held that statutory annual leave not taken by the sixth month following the annual leave cycle in which it accrued is forfeited. [However] in the case of Jardine v Tongaat-Hulett Sugar Limited (2003) 24 ILJ 1147 (LC) the Labour Court held a different view and found that statutory annual leave not taken is never forfeited and may be carried over to subsequent annual leave cycles.[3]

4)    Retrospective correction of HR and payroll administration blunders, takes an inordinate amount of time to fix — loss of employee productivity is certain to follow

The spectrum of leave variables to be monitored—relevant to an employee’s hours worked—can become extremely complex to keep track of. This is aggravated when your workforce is greater than a mere handful of employees.

If manually managed, the permutations of possible errors that might arise are numerous. Thus the odds of making payroll and HR blunders remains high, if not inevitable when manually administered and managed.

The BCEA refers to such a variety of determining variables, (each under different conditions), that one may be forgiven for finding the process extremely complex to understand, not to mention complex to manage too. To illustrate this point, consider the following set of guidelines originating from the BCEA:

…Employees working less than 24 hours per month are not entitled to annual leave, …a leave cycle is for 12 months (from the date of commencement of employment), …but, if the entitlement is 21 consecutive days annual leave on full remuneration, in respect of each annual leave cycle, and if an employee works a five-day week then this is equal to 15 working days, or if the employee works a six-day week then it is equal to 18 working days.

After reading the preceding paragraph, you may be thinking to yourself, “stop! time out! slow down!”, with the point being, that complexities within HR and payroll administration could turn out to be rather involved when manually administered and managed.

5)    Inaccurate leave records produce disgruntled employees — an unhappy labour force and dispirited employee climate is the result

Accuracy of the calculation of employee leave is vital — there is no room for error. For example, with annual leave accruals, the employer needs to use one of two factors. Either 1,25 or 1,5 days per month (dependent upon whether the employee works a five-day or six-day week). Alternatively, accrued annual leave, may also be determined using the 1 hour for every 17 hours worked[4] equation, …which also equates to 1 day for every 17 days worked.

As reader, by now, you may well have realised that there’s a pattern that is being revealed here: namely, evidence of numerous sets of basic conditions, rules and calculations. Although not rocket-science in itself, these can be draining on administrators’ concentration and thinking, …possibly even more so when these calculations and tracking processes have to be repeatedly and regularly determined by a staff member working in an HR and/or payroll office, on an ongoing basis.

When manually administered, the chances of human error creeping in is almost inevitable. For these reasons—as well as many other not necessarily raised in this article—automation of the payroll system has become a wise choice and sound investment for many a small- to medium-sized business organisation.

 In the final analysis

In the final analysis, an automated payroll and HR administration system gives the owners and investors of an organisation much needed peace-of-mind. With specialised electronic software technology in place, with a dedicated set of outsourced professionals keeping an astute and experienced eye on your payroll and HR administration, you and your staff are freed up to keep your eye on the ball. That is, to focus on the core business imperatives and operational activities of your organisation.

 Keep your eye on the ball – stay up to date with ongoing knowledge-refreshers

To conclude, once you have your new automated payroll system in place, Ian Hurst, CEO of Paymaster Payroll Solutions encourages employers (at all levels of business) to “regularly refresh their knowledge of employee leave guidelines”.

The following comprehensive leave guide may come in handy and serves as a good example of the type of online content that employers ought to scanning the web for, for regular refresher-reading on an ongoing basis.

Do you wish to know more about the Paymaster automated payroll system?

You are invited to contact Ian at Paymaster — he will be happy to attend to your enquiry.

 

Endnotes & Sources

[1] http://www.labourguide.co.za/conditions-of-employment/437-types-of-leave [Accessed: 28 November 2015]

[2] http://www.labourguide.co.za/conditions-of-employment/435-everything-you-need-to-know-about-leave [Accessed: 28 November 2015]

[3] http://www.bowman.co.za/News-Blog/Blog/Annual-Leave-Law [Accessed: 27 November 2015]

[4] http://www.labourguide.co.za/conditions-of-employment/435-everything-you-need-to-know-about-leave [Accessed: 27 November 2015]

 [/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Adrian Baillie-Stewart

Follow us

Don't be shy, get in touch. We love meeting interesting people and making new friends.