Struggling with Costly Leave Accumulation: How Can I Adjust Without Reducing Benefits?

Please help me with this. Ten years ago, when I established my company, I issued a memo to my employees stating that for every year worked, they would earn one day each for sick and vacation leave. Currently, their leave credits have accumulated to ten days each for sick leave and vacation leave for 50 employees. I acknowledge that the memo was a mistake, as I did not consider its long-term consequences (given that I was 23 years old at that time). This situation has become very costly for me. How can I rectify this without violating the principle of diminution of benefits?

Thank you in advance.

Going by your statements, it looks like you do have very stable employees; otherwise, this situation wouldn't have arisen. I don't think there's anything to feel bad about introducing a short-sighted policy as long as you are willing to learn and correct along the way. Many companies fail in this crucial aspect.

Query/Concern

Please confirm the domain/sector your company is in—IT, Telecom, etc. Since you are in the Philippines, I suggest evaluating the general Leave Policies in other similar-sized companies in the same sector. This would give you some semblance of being on par with industry standards and ensure your employees don't resist whatever changes you bring about.

Steps to Fix the Situation

As for how to fix the situation, I suggest first consolidating the pending leave dues of each employee into a fixed leave balance, rounding off to the nearest numeral as of the current date. You could retain the leave balance as it is or maybe pay the employees a fixed amount for the leaves you wish to be 'abdicated' or lapsed.

Then introduce the new leave policy, which will take effect from a predetermined date that you need to inform the employees in advance. With some fine-tuning, you should be able to get a model that will be, by and large, acceptable to all—and more importantly, that would stand from the long-term standard viewpoint.

All the Best.

Regards, TS

Dear Ms. Lorly168,

Introducing the New Leave Policy

Reminiscent of what has been explained by Mr. TS - "THEN INTRODUCE the new Leave policy" is the next preeminent option. Certainly, you're not on the wrong side of what has been thought as policies (if any) regarding extended vacation, such as sabbaticals, and sick leaves are at the discretion of individual employers.

Regardless of the reason, it can be difficult for employees to adjust to the changes initially introduced; however, you should be able to clearly explain to your staff why the procedure must change. Notify the changes in prudence - do so as soon as possible to give everyone a chance to absorb the news. If possible, make sure you give them enough time to express their queries and schedule a meeting regarding the implemented changes.

Addressing Employee Concerns

Important: Make sure you attend to all the questions asked by your employees, leaving no one perturbed. Stay relaxed in the situation; if you are unable to address any query, get back to them after a minimum time period.

I'm sure these little things could make a worthwhile procedure for the alterations made for the mutually beneficial association.

Regards,

In the circumstances explained by you, you can examine whether you could introduce 'Leave encashment' so that your immediate problem could be solved. This could be either compulsory or voluntary. After this, you can evolve a pragmatic new leave policy, which in all probability will not be liked by employees. Regardless of the backlash, you have to push through this reformed leave policy.

Regards,
Kumar S.

Let me get this clear: Everyone gets 2 days of leave every year? Do they have to work all through the rest of the year (or take leave without pay)? Do your local laws allow such a thing? I don't think any country that is a member of the ILO will allow this. Then, when people have not used their leave, you want to further penalize them by withdrawing the benefits?

Understanding the Establishment and Leave Policies

First, you have to understand what the establishment is. Your memo is ridiculous. Before issuing the memo, didn't you consult with anybody? As per your statement, every year your employees are allowed only 1 day.

As per the FACTORIES ACT, if anyone works for 240 days, they are eligible for 12 days in a year. Do you know this? For this, you should be penalized.

Thank you all for your replies. May I correct Subbarao.v and Saswatabanerjee? I gave them 3 days each for SL & VL, totaling 6 days for EACH YEAR. Additionally, I granted 1 extra day each for SL & VL, making it a total of 2 days ADDITIONAL for every year they stayed in my company. My oldest staff member has been working with me for 10 years now and has accumulated 40 days of SL. By the way, our VL is convertible to cash at the end of the year. I am trying to control this scheme as I did not anticipate its long-term effects with more than 50 employees.

At 23 years old at that time, I consulted our government labor agency as I am solely running this business. Based on our Philippine Labor Code, it is mandatory to give a MINIMUM of 5 days total leave for each year. It is the company's discretion to give more. I have no problem with the new staff as I can simply revise the policy. However, my main concern is with the older employees as I might inadvertently impact the so-called "diminution of benefits." I apologize if my initial post was incomplete.

Regards.

We would love to be in your place. Indian labor laws require 1 day of paid leave for every 20 days worked, meaning we give about 3 to 4 weeks of paid leave to our workers every year.

Regarding your current issue, you can send a fresh memo withdrawing the benefits effective from this year (but it would be unfair to cancel what they have already accumulated). Allow them to use the accumulated leave over a period of time, or make a provision for the amount (set money aside) to pay them when they request it.

I have corrected the errors and ensured the text is properly formatted with single line breaks between paragraphs. Please let me know if you need any further assistance.

You can give an option to your employees: either they can get an encashment of their leaves or they can enjoy the leaves. In case they opt for leaves, inform them that they can take 10 days at a time, and the person opting for leaves will not get encashment for the remaining leaves. For example, if a person has accumulated 40 days, then they can go on leave 4 times (10 days each).

This is just a suggestion. For this, you need to review your industry's and country's laws. I would love to have feedback from the seniors. Remember, mistakes have been made in the past; you have to compensate for them somehow. Remember to add some useful clauses for leave lapse in the future.

All the best.

Thanks

It's between you and me for academic interest. How do you consider this leave policy a "mistake"? The leave policy currently in place is quite normal, and almost every establishment near and far follows a similar policy. The problem arises or is feared only because not everyone avails the accumulated leave at credit. The afterthought is, "What if everybody takes leave en masse?" Now, looking back, there is consideration for introducing some changes, hopefully reducing the number of leave days or setting a limit for accumulation. What else could be done now? But who would accept this without a "carrot," only the stick?

Regards,
Kumar.S.

Thank you for sharing your views. With due regards to you, I would like to say that I did not say that the leave policy is a mistake, but some ignorances in this policy are definitely a mistake. If it were not a mistake, then Mr. Lorly would not have shared his problem on this portal.

Attention to Policy Details

I would like to draw your attention to some facts that must have been paid attention to, but it did not happen:

• The leaves have been accumulated. This fact has been realized after 10 years.
• In the policy, there is no clause stating that 'after a certain number of leaves have been accumulated, the further leaves will not be carried forward to the next year.'

Such other clauses could have been there to avert such a situation. That is why I suggested him to be careful in the future as well.

Regards