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Time off

What is a leave management system? Why do businesses need one

3 Agustus 2022

8 min read

Komal
Komal

Leave management systems are computer-based applications that help businesses manage employee time off requests and absences. As a business owner, you might wonder if you really need an employee leave management system. After all, can’t you just keep track of employee vacation days in a spreadsheet?

While tracking employee vacation days in a spreadsheet may work for a small business with just a few employees, it quickly becomes unmanageable as the business grows and it could create a lot of administrative overhead. A leave management system is the solution to help automate processes associated with managing employee time off policy, such as calculating time off days entitled, tracking time off balance, and approving time off requests.

In this piece, we’ll explore some of the key benefits of having a leave management system in place for your business. 

Table of Contents

What is a leave management system?

A leave management system is a software application that helps organizations keep track of employee leaves and absences. The system can automate leave-related processes such as applying for leaves, approving leaves, calculating leave entitlements, and determining the remaining leave balance. A leave management system is also sometimes referred to as a paid time off tracker (PTO tracker). 

How can leave management system help your business?

Leave management is an essential part of any business, as it allows organizations to effectively track and manage employee time off. Here are some of the key reasons why business owners should consider adopting a leave management system and how it can add value to company operations:

  • Accurate calculation: Time off is heavily connected with employee compensation. Failure to determine the accurate time off balance may lead to incorrect salary calculation which causes monetary losses and potential legal consequences. A leave management system can help determine accurate time off balance. Imagine scenarios when an employee took unpaid time off, or when an employee is leaving and has to “encash” his/her remaining leave, or when an employee works on a weekend and the company made a “time in lieu” adjustment. A leave management system can help accurately determine the leave balance, giving you a piece of mind.
  • Automate and streamline leave-related processes: A leave management system eliminates the need for manual leave tracking and automate processes associated with applying for, approving, and managing leaves. The employees can easily get a bird’s eye view of the remaining number of leaves they have left and don’t have to ask the HR each time they wish to take a leave. HR also doesn’t have to manually update spreadsheets for every leave request. This can save a significant amount of time and effort for both HR staff and employees.
  • Ensure compliance with employment regulations: Most countries or states have statutory requirements on sick leave, maternity leaves, and other mandatory leave entitlements for employees. A leave management system can help businesses comply with employment regulations by calculating the accurate balance of the various types  of leave each employee should be entitled to. 
  • Better visibility: Give your entire team access to a shared time off calendar, so that everyone can have a clear view of who is going to be on leave at any given time and plan accordingly. This way, your team can avoid disruptions to workflows and maintain a high level of productivity.
  • Improved employee satisfaction: By using a leave management system, managers can stay on top of which employees in the team are not taking any time off and periodically encourage them to do so. 
  • Fewer surprises: With an accurate PTO tracker in place, managers will always be able to plan for any absences in their team. By providing managers with real-time access to employee leave information, a leave management system can help businesses minimize unplanned absences on workplace productivity. Additionally, it can enable employers to identify and address staff shortages and scheduling conflicts before they become significant issues. 
  • Improve communication and coordination: With a leave management system in place, managers and employees can easily communicate about leave requests and approvals. This can help to improve coordination and avoid misunderstandings.

Does your organization need a leave management system?

Here are some signs that your organization can benefit from using an automated leave management system: 

  • You or your team is losing track of who is on leave on which day.
  • You are having some issues with calculating time off entitlements accurately and keeping them always updated.
  • You are spending too much time on managing leave requests, updating leave balances, and answering employee queries.
  • There is a lack of communication and coordination between employees and managers regarding leave requests and approvals. 
  • You are finding it challenging to ensure compliance with employment regulations. 
  • You are experiencing high levels of absenteeism, which is impacting workplace productivity. 
  • You are struggling to manage staffing requirements due to unplanned or unexpected absences. 

What are the key features of a leave management system software?

A good employee leave management system software should have the following features:

Dashboard/calendar view

Provide a dashboard or calendar view that makes it easy to see leave requests, approvals, and other relevant information.

Ideally, the dashboard of the leave management system should allow users to: 

  • Easily submit leave requests: The ability to quickly and easily submit leave requests. 
  • View leave balances: The ability to view leave balances, including vacation policy, sick days, and unpaid time off. 
  • Approve or reject leave requests: The ability to approve or reject leave requests. 
  • Send notifications: The ability to send notifications to employees and managers about leave requests, approvals, and other relevant information. 

Flexible time off policy setup

Because every company has their own unique time off policies, the leave management system needs to be powerful enough to accommodate exactly the way how your organization grants time off. 

A good leave management software should support settings such as whether unused time off can be carried over to the next period and how time off should be prorated in the first/last month when an employee joins/leaves the company.

Configurable form

A configurable form allows users to define the types of information they want to collect from employees when submitting leave requests. This can include information such as start and end dates, reason for leave, and whether a supporting document is required. 

The system should allow you to configure settings such as leave type, duration, and approval process to meet the specific needs of your organization. For instance, you may want to configure the system so that it automatically approves vacation leave requests from staff members with a certain level of seniority.

Automated requests/leave balance tracking

The system should automatically send time off requests to managers, track leave balance, and notify employees when their unused balances are about to expire. 

Customizable approval workflows

The system should allow you to customize the approval workflow to match your organization’s specific needs. For example, if you use a hierarchical approval process, the system should allow you to specify the order in which leave requests are approved. 

Easy to use

Many traditional leave management systems are very difficult to use to the point where additional training is required for employees to know how to apply for time off. A good leave management system should be user-friendly and easy to use. While selecting a system, you should sign up for a demo account and try the product first-hand to ensure the system is easy to operate. 

Seamless integration

A modern leave management system may have built-in integrations to help improve your team’s productivity. This includes synchronizing time off events with the employee’s Google Calendar or Microsoft Outlook Calendar, and allowing users to apply for time off, approve time off, and check time off balance directly via Slack or Microsoft Teams. 

Reporting 

The system should provide reporting and analytics tools to help you track and optimize leave-related processes. You will be able to better assess employees’ leaves and apply the data to other processes. 

For example, you can use reporting tools to generate a report on the total number of days of leave taken by each employee over a certain period of time. The report can then be applied when processing payroll, to determine if any adjustments in payroll are needed.  

Conclusion

Overall, businesses that invest in a good leave management system can improve communication, collaboration, and productivity within their organization. If you are looking for a powerful and easy-to-use leave management system, there are many options available on the market today. The key to finding a good employee leave management software is to identify the specific needs of your organization and then find a system that offers the features and functionality you need to improve your leave-related processes.

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