3 reasons to use anniversary year as the annual leave cycle

In Singapore, according to the Ministry of Manpower (MOM) there are 2 patterns for annual leave cycles. The first pattern follows the employee’s anniversary year so if an employee was hired on 8 August 2020 then his leave cycle will be from 8 August to 7 August of the next year. The other pattern is based on the calendar year which means his leave cycle will be from 1 January to 31 December of each year. Here we will show you 3 reasons why your company should choose the employee’s anniversary year as the annual leave cycle and how StaffPage leave management system handles it.

1. It is common in Singapore that an employee’s annual leave entitlement depends on the number of years of service he has worked for his employer. The standard practice is to add one day of annual leave to a fixed amount after every 12 months with a limit to the entitlement total. MOM has stated this minimum number of annual leave for each year of service as shown below (info source from MOM website).

If the annual leave cycle is based on the employee’s anniversary year then it is clear that the employee’s leave will increase by 1 day on each anniversary date. However, if the leave cycle is based on the calendar year then MOM states that the increase of 1 day falls on 1 January of each year. This means whether you joined the company on 1 January or 31 December of last year you will still get an extra 1 day on 1 January the following year. It does not make sense as it seems to be unfair that someone joining at the end of the year is able to gain 1 more extra day at the same time as someone else who joined at the start of the year. Although there are some other leave systems that use the calendar year as the leave cycle, they have also used the employee’s anniversary year when allocating the new leave entitlement which should not be done as stated by MOM. If the company wants to use the calendar year as the leave cycle, then all employees must follow this leave cycle which allocates the new leave entitlement every 1 January.

2. How annual leave is earned every month depends on which way it is being prorated. If the employee’s leave cycle is based on anniversary year then it is obvious as shown by this next example. The employee joins the company on 8 August 2020 and on 15 December 2020 has completed 4 months of service thereby earning 4 days of leave (assuming the entitlement is 12 days for the year then 4 months / 12 months x 12 days = 4 days). However, if the employee’s leave cycle is based on calendar year then August 2020 will be considered as an incomplete month of service as he did not start on the first day of that month. The employee will only start to earn leave on 30 September 2020 as that is the first complete month of service. It is therefore not surprising that your employees would not know these details when their leave are being calculated. This unfortunately means that the company will definitely spend a lot of time to explain to its employees about the calculation based on the calendar year. Furthermore, if an employee works for 1 year or less then the leave must be prorated based on the number of completed months worked starting from the hire date instead of how many completed calendar months, as you can see this is really confusing.

Using the same example from above, if the employee was hired on 8 August 2020 and resigned on 15 December 2020 then since it is within 1 year so the leave will be prorated according to the anniversary year which means 4 completed months of service. However, if the calendar year was used then there would only be 3 completed months of service from September to November 2020 but it would not be the correct way to do so.

3. The previous 2 reasons demonstrate the problems that will be encountered when using the calendar year as the leave cycle. Let’s turn to the impact on the business. In Singapore most companies allow employees to carry forward any unused leave to the next leave cycle with the balance limited to a number of days and expiring within a certain period. Assuming the leave cycle is based on the calendar year then everyone’s leave cycle will be from 1 January to 31 December. In this event employees would be rushing to clear their leave at the end of the year to prevent any leave that cannot be carried over from being forfeited. However, if this is the peak period for the business or certain departments then they will surely encounter a manpower shortage. The same exact scenario will happen again at the beginning of the next year as employees would want to take their leave which have been carried forward before their leave expire. As this is a recurring situation every year it can be resolved by converting the leave cycle to be based on each employee’s anniversary year. The company would no longer face a resource shortage issue either at the end of the year or at the beginning of next year. It would also have enough manpower available to plan for the business.

After gaining an understanding of the various above scenarios for annual leave, you may wonder why companies still choose to have the leave cycle be based on the calendar year instead of the employee’s anniversary year. 2 reasons come to mind – firstly for the benefit of the HR department and secondly for the benefit of the finance department. On one hand the HR department wants to have a clear way of managing carried forward leave on 1 January every year so it’s visible to them who are carrying over how many days of leave. On the other hand the finance department wants to know the leave balance of each employee at the end of the year for cost projections so that they can forecast their budgets. However, this should not be the top priority as the smooth running of the business must be the topmost priority. If we were to probe further we will then realise that due to the limitation of the leave management system which may not support the leave cycle based on each individual employee’s anniversary year or it may only support the carry forward of leave on the first day of every year.

StaffPage’s Employee Leave Management system not only supports these different types of leave cycles, but it also supports different groups of people having different leave cycles according to business requirements. The HR department can then easily generate a report to view the number of days carried forward to the next leave cycle for any employee. This also makes it easy for the finance department to know the leave balance of each employee at the end of every month. For peace of mind and never ever mess with employee leave management again please head over to our website https://www.staffpage.com/en-sg/leave-management/ for more details and click Contact Us to enjoy a first-class service from StaffPage.