Should You Allow Employees To Encash Their Remaining Annual Leave This Year?

Now that we’re approaching the end of the year, and COVID-19 is relatively under control, the topic of remaining annual leaves is starting to make rounds.

In Singapore, employees have a minimum of 7 days of paid annual leaves per year as mandated by the Employment Act. Employees are also entitled to an additional day of annual leave for every year that they stay with their employer up to a maximum of 14 days of paid annual leaves.

How Long Employees WorkedAnnual Leave Entitlement
1 year7
2 years8
3 years9
4 years10
5 years11
6 years12
7 years13
8 years and above14

Of course, companies may go beyond this by providing more annual leaves at your discretion. 

Many Employees Haven’t Had The Chance To Take Annual Leaves In 2020

The problem – this year hasn’t allowed many employees to take as many leaves for three main reasons:

#1 Some employees have had to work harder and longer providing required services. This group of employees typically work in the public sector and in healthcare facilities.

#2 Another group of employees may not have had the time to take as many leaves is those working in high growth sectors or essential services – e-commerce, digital services and technology and delivery, grocery stores and handyman services. Many companies in high growth sectors saw their growth boom during the lockdown and possibly even now. Some companies providing essential may have been stretched for manpower, especially since the border with Malaysia was closed.

#3 In general, this year has not provided many opportunities for people to take annual leaves. International travel was closed for much of the year, and despite the gradual reopening of Air Travel Bubbles (with Hong Kong for now) travelling remains muted. Working-from-home, while giving some employees more problems in having to take care of children or elderly parents, also provided slightly more flexibility in daily schedules and thus reducing the need to take annual leaves. 

Read Also: Fast Lane; Green Lane; Air Travel Pass; Air Travel Bubble: What You Need To Know About Singapore’s Travel Agreements

So, What Can Employees Do With Remaining Annual Leaves This Year?

According to the Employment Act, employers have to allow employees to carry forward unused annual leaves to the next 12 months, only if they are a workman earning up to $4,500 a month or a non-workman earning up to $2,600 a month.

For such employees, hopefully 2021 is a better year to take leaves and they can use them without similar disruptions. However, this still leaves many employees unable to roll over their remaining annual leaves and having to forfeit them.

Employers have 4 main options:

  1. enforce a block leave for employees to give them a well-deserved break
  2. let your employees’ annual leave entitlement be forfeited
  3. let employees roll it over to next year
  4. allow employees to encash it

Some companies would already have your own guideline for managing excess annual leaves. However, given the extraordinary circumstances this year, there could be an argument to provide more flexibility.

In a big departure from normal standards, the Public Service Division (PSD) and Ministry of Health (MOH) have stated that they will allow more time for employees to use their annual leaves and even encash up to nine days of annual leave.

Typically, such civil servants and healthcare workers can only roll-over their remaining annual leaves for one year, and it will be forfeited thereafter. This means their 2019 leaves rolled over will be forfeited at the end of 2020. With this move, civil servants and healthcare workers have more time to use their 2019 rolled over leaves and are able to encash up to nine unused annual leaves in 2021.

Should Employers Allow Your Workers To Encash Annual Leaves?

While this is only for the civil service and public healthcare workers, it may provide a signal for private employers to be more flexible with their employees annual leaves. 

For companies providing essential services and those on a huge growth spurt, allowing more flexibility for employee annual leaves feels like the right thing to do. Afterall, your employees played their part in keeping the company afloat and/or able to leverage on a growth opportunity when it most needed it. 

For companies trying to cope with COVID-19 disruptions, your employees are also working hard and may even have had to take a reduction in salary. Enabling flexibility in extending the timeframe they can use annual leaves also feels like the right thing. Of course, if your company cannot afford to encash annual leaves, employees may understand.

Read Also: MOM Responsible Retrenchments – Guideline For Companies To Be Fair And Decent

Pros And Cons Of Allowing Employees To Encash Their Annual Leaves

As with every decision, there will be pros and cons.

Pro: #1 Boost Employee Morale

Employee morale will be higher and it also gives your employees more free cash during a difficult period when their financial situation at home may be uncertain. Given the widespread disruptions caused by COVID-19, even if they were not affected in terms of job security or pay cuts, their loved ones very likely may have been affected.

Pro: #2 Being Fair With Your Employees 

By allowing your employees to encash their annual leaves, you are also being fair with them and you remove any need for employees to be calculative. You also don’t want your employees to feel forced to take annual leaves just so they do not feel short-changed, especially if your company and other employees would be better off if they just worked those days.

Con: #1 Employees May Hoard Annual Leaves For The Cash Payout

You don’t want employees to hoard leaves right now just so they can encash it at the end of the year or at some point next year. The problem isn’t just about the money – it’s that working-from-home may result in some trying to balance other commitments while claiming that they are “working”. It may also leave employees who really want to destress or unwind with a staycation with a tougher choice of going for the money or taking their leaves.

Con: #2 It Will Cost You Money

On the other hand, encashing leave may be a strain on your cash flow. This may be very important for your business today and you cannot afford it, or you may not realise that it will be important in a few months’ time. 

Either ways, backtracking or running into financial difficulties in the future will not be an ideal situation for you or your employees. At the same time, there is still a win-win outcome for both parties – you can provide flexibility by allowing employees to extend their use of their annual leave. 

Con: #3 Your Employees Will Remember This Move

Setting this precedent could also lead employees to think that this policy may continue indefinitely. And even if your employees do not think that, it will surely be on their minds when they see annual leaves being forfeited in the future.

Con: #4 Future Annual Leave Encashment May Be More Expensive

As a smaller point, for any employees set to receive a pay raise in 2021, you will be paying a  higher rate for annual leaves that would have been forfeited in 2020 or encashed at the end of 2020 itself if you allow it to roll over.

Encourage Employees To Take Leave

Besides just the accrual of annual leaves or being able to encash it, COVID-19 has also taken a toll on your and your employees’ well-being.

Encouraging your employees to take leave, especially in line with the government initiative to give Singaporean adults $100 in SingapoRediscovers voucher may allow employees the headspace to destress or offer them respite from thinking about work just for a few days.

You can also lead by example, taking a few days off to spend precious time with your family. This may further encourage your employees to take their leaves.

Need Financing Support During This Period?

From now till 31 March 2021, SMEs can enjoy extra financing support of up to $5 million through the Temporary Bridging Loan Programme.

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