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How to design a Leave Policy for SME

11 min read

When It Comes To Designing A Leave Policy It Is Observed That A Lot Of HR Managers/Executives Often

Design policies based on their experience in the past organizations and often times quite disconnected from what is relevant to their current organization. We set out to write down a few guidelines for designing right leave policy for your organization. Leave Policy is also one of the primary factors that can influence an employee experience within a company and it is important to get it right.

What we observed after studying many organization leave policies is that often times it appears that there is an unwritten rule book and undefined sections of constitution that many HR managers unwaveringly abide by when designing their leave policies. Most possibly because they feel this is the industry ‘standard’ and that they can never go wrong or be blamed for following the standard.  It is important to understand that, what worked for one organization does not work for  another organization and that each needs to design their policy to fit their needs.

Factors That You Need To Consider When Designing Your Leave Policy Are:

  1. Size of Business
  2. Nature of Business
  3. Culture

Size Of Business

What works for a large corporate doesn’t work for a startup and vice-versa.

Startups that are less than 20 in size are usually close knit and there is a strong bonding among the team members and all the team members independently take ownership of their work. Most employees would all behave responsibly when it comes to taking leaves and also there is more visibility across the organization when someone is missing from their job responsibilities more often. So it helps to have as simple leave policy as possible. Most startups across the world use an unlimited paid leave policy and do not have any other leave types such as sick or casual leave. This keeps things most simple for employees and it also works pretty well for the startup from a business perspective. In an unlimited leave policy usually there is no carry forward balances or balance leave en-cashments, so the startup can save on this additional burden.

As the business size grows and you have better cash flows, you may want to introduce more leave types to suite employee needs and also add restrictions to prevent abuse. Check here on various leave policy restrictions that are possible with Leave Management.

Business Goals

Designing a leave policy in an organization should be based on the nature of the business and the organization’s business goals. Hence this is a collaborative effort of Business executives and HR. Like we propose all the time, it is imperative for current generation HR teams to understand the company’s core business and be a part of the business goals. That is when you the HR policies and decisions stay most relevant and fruitful for the organization.

If you are an offshore IT services firm, where the employee availability is bound by the commitments to clients, you may want to design your policy to limit frequent and very long term leaves and still meeting the vacations needs of your employees. You may design your policy such that the employee cannot take more than 2 consecutive leaves in a week. If it is a support function with mission critical commitments on employee availability, you may tighten even further.

If you are a retail organization that require employee availability on Saturdays and Sundays, you could define their weekly time off days to Wednesday or Thursday and may even have a heavy penalty for not showing up on on Saturday or Sunday where business is at its peak with customer rush.

One Size Doesn’t Fit All

Whether you are a startup or a grown up business, not all employees have the same job function. The sales team may have a different work demands than a programmer.  So it is important to understand that when it comes to Leave Policy, one size doesn’t fit all -One leave policy doesn’t work for every job function. The HR policy designer need to work with each of the business departments or functions and design various leave policies accordingly.

As an example, consider the case of an Offshore Software development company whose sales team work in US time zone. Most sales activity in a US market comes to a grinding halt during December US holiday season. Most customers are not available to take calls and no new contracts or budgets are signed during this period. The sales team then may not actually have much to accomplish during this period. It is then better to design a leave policy that encourages the sales team to consume all their leaves at the end of the year. You could design your leave plan for US Sales team such that it doesn’t carry over to the next leave calendar year.

For a sales team working in the domestic Indian B2B market, companies can encourage them to take leaves during festival times such as Dussehra, Diwali when the sales activity is slow. Whereas sales team working in B2C or retail markets would actually want to ensure that all of their sales force are available without fail to handle the peak business season. You could design your leave policy that ensures their availability.

Just so if you are wondering, here is the clarification. Keka HR Software  handles various leave policy rules quite extensively and it handles pretty complex scenarios. We even went on to claim that Keka is the most extensive and best Leave management system in the world and we are yet to be challenged there!

Culture & Employee Friendliness

While it is important to ensure your leave policies are in alignment with your business goals, it is also important that you consider Employee experience when designing your leave policy. An organization with too many restrictions in their leave policy can end up frustrating their employees and this frustration eventually builds up and leaves a bad impression on HR as a function. We see some of the HR departments acting like a police with irrelevant and complex leave rules, that it neither serves the business purpose and nor helps employees. You do not want to be part of such a HR department in the current generation!

Statutory Leaves

Regardless of the size or the type of business, it is important to understand that every organization needs to respect and  abide by the statutorily mandated leave policies imposed by the law. The statutory leaves are there for a reason and any company that cares for their employees will find it is in their own best interest to offer these statutory leaves to show employees that they care. Regardless these are mandated by Labor Laws and companies cannot deny offering statutory leaves such as Maternity, Paternity and Bereavement. Most HR systems come pre-equipped with these leaves and Keka has these also pre-defiend in every leave plan.

Ensure Leave Policy Is Available When Its Needed And Where Its Needed

Many organizations design a very robust and comprehensive leave policy only to find that most employees have never read it and haven’t even opened the document. About 99% of the cases Leave Policy is a Word or a PDF document that is made available to employees shared in a email or Shared as a link in an email in some corner on their intranet portal or in most cases, in a file share. In a busy work environment it gets lost and forgotten in black hole of time and most employees can’t even recollect that it ever existed.

At the nick of the time, when an employee applies for a leave only to find that he cannot apply for a privileged leave due to the restrictions that he never knew existed. This builds up dissatisfaction

Keka HR software takes care of this problem very well and it is the only platform in the world that has the automatic leave policy generation engine. It actually creates a Leave policy document per individual based on the leave plan they were assigned and it is made available right where they need it most i.e. When they are applying for a leave. It explains in plain english the ‘what and how’ of every leave restriction you may have added in your leave configuration.

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    Meet the author

    Keka Editorial Team

    A bunch of inspired, creative and ambitious youngsters- that’s Keka’s editorial team for you. We have a thirst to learn new subjects and curate diverse pieces for our readers. Our deep understanding and knowledge of Human Resources has enabled us to answer almost every question pertaining to this department. If not seen finding ways to simplify the HR world, they can be found striking conversations with anyone and everyone , petting dogs, obsessing over gadgets, or baking cakes.


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