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7 tips to manage annual leave at your small business or startup

Managing time off is an important part of management in general but it is especially crucial in the context of running a small business. If two people go on holiday at the same time and you only have two employees, your company’s output will be non-existent.

As an HR professional, I've had a lot of questions over the years as to what the best way of dealing with annual leave may be. That's why I thought I'd share my tips on how to make this work for your small business or startup.

Managing annual leave tip 1 – set an annual leave entitlement

How much you set as the standard for holiday entitlement in employee contracts depends on your business. Obviously, there are legal minimums to follow but in order to be competitive, you might want to think about making room for more.

The best way to determine how much you set is to think about how you compare to other businesses in your industry:

  • Benchmark to find out whether you want to be in line with the market or more generous
  • If you go below market, you might be sending the wrong message to prospective hires
  • A difference of one or two days won’t usually change very much, so unless you are set on being more generous on the amount of leave you offer compared to your peers, it’s probably easier to follow the market trends

Some organisations even manage to make unlimited holidays work – we also tried to do this at Charlie, but we ended up scrapping it altogether.

Rather surprisingly, because of the pressures of the modern workplace, we found out that many employees who supposedly benefit from unlimited holidays will actually take fewer days off than their peers who have a rigid leave policy. When it’s left up to them, people are often cautious about taking more time off.

So maybe have a think about what's best for your team members and your company altogether before making a decision.  

And perhaps also check our guide on managing employee absence for your small business or startup with expert guidance from our in-house HR manager.

Managing annual leave tip 2 - manage holiday requests properly

Be wary of clashes when it comes to managing annual leave for your team. Here are a few ideas of what that can look like:

  • Try to avoid having multiple people on the same small team being away at the same time. If your business works to strict deadlines, managing time off requests badly risks over-burdening those who aren’t on holiday and leading to your company underdelivering or missing targets.
  • Think about whether you want the team’s holidays to be spread out evenly across the year so that the company can always work at the same capacity. This tactic will also minimise the likelihood of multiple employees taking holidays at the same time.
  • If business tends to slow down during the summer months, you might want to encourage as many people as possible to go away at that time. Many e-commerce companies, for example, will strongly discourage employees from taking any substantial time off during the fourth quarter, because that is the busiest and most vital period for them.

You have to keep in mind that there is always, necessarily, a minimum capacity required to keep your organisation running.

It’s easier to stay on top of when people are off when you’re a small team. But once you start to grow, it can become overwhelming – especially because you also have to track sick leave, unauthorised absences from work and many more.

As soon as your organisation grows to 10 or 15 people, problematic clashes can arise, and this is much sooner than many business leaders assume. Keep an annual leave calendar, use a Google Sheets holiday tracker or perhaps get help from HR software like Charlie.

With HR software, you can approve or deny time off requests in one click and make sure you never miss any overlapping time off thanks to automatic notifications via email and Slack.

manage annual leave - annual leave entitlement in CharlieHR

This allows you to be fast when it comes to approving time off requests, making it a breeze for you and increasing employee satisfaction in the meantime.

Managing annual leave tip 3 – allow team members to carry over holiday onto the next year

Among the rules you might want to implement for your team, there's one that you shouldn't leave aside: carrying over holidays.

Carrying over holidays is extremely important if you want to become an appealing employer and if you want to avoid everybody going on holiday at the same time at the end of the year.

You will need a clear and defined annual leave policy to ensure people don't end up carrying over too much time off (as well as making sure they take enough time off for their own mental health).

My last piece of advice regarding this, and if you want to make sure you keep track of it all, is to have all annual leave recorded in HR software.

With Charlie, for example, you can automatically set the company carry over on the platform, and it'll be applied to each team member if they don't take all the annual leave they're entitled to.

And if you don't want anything to go amiss, simply pull a carry over report to nudge any team members with too much leave remaining.    

Managing annual leave tip 4 – keep an eye on annual leave requests

It's your team members' responsibility to make the best use of their annual leave allowance — some people do prefer to take all their time off in one go.

However, time-off usage does affect your business' productivity levels, so perhaps think about keeping an eye on annual leave requests. Here's how you can do this:

  • Check time off reports like the ones we have in Charlie – they will tell you you how much annual leave each team member has taken
  • Keep an eye on what the busiest periods of the year are to see whether you need to set restrictions on overlapping holidays and whether it's affecting your business
  • Maybe get in touch with team members who don't take enough holidays and have a catch up to understand why and whether their workload is adequate

The last thing to remember is: annual leave is not your enemy. On the contrary, it will make sure your team members come back to work full of energy and ready to deal with any challenge, so make sure they take it.      

Managing annual leave tip 5 – set a few limits for holiday management

As mentioned before, I sometimes advise my customers that they need to set limits when it comes to time off.

This is not mandatory, but it's only if you observe certain patterns and issues that arise with the amount of time off taken by your team.

Here are a few examples:

  • Team members request holidays that are longer than two weeks, making it hard for the business to go on without them and leaving other team members without the ability to take leave
  • Team members request annual leave at the same time every year, making it unfair on other people who might want to take leave in the same period
  • Team members disagree on your schedule and want the same period of time off, making it difficult for you to make a decision
  • Team members ask for time off at critical times for the business

All of these examples present challenges on both an equality and operational level. If you encounter them, outline limits and rules as clearly as you can in your HR policies – learn more about it here to understand what is annual leave at your business.

Managing annual leave tip 6 – build a strong HR policy


All the points I mentioned before have led up to this: building a strong HR policy for your business is key if you want to manage annual leave properly.

Building an HR policy might sound difficult when you've got no HR experience, but it will be essential.

If you're interested in building a bespoke holiday policy for your business, we can always help. Perhaps take a moment to have a look at the HR advice service we offer.

Otherwise, here's some of the advice I can give if you'd rather have a go at it yourself for the first time:

  • Document the ins and outs of the company policy: annual leave allowance, restrictions around time off, overlapping time off, notice periods, etc. Don't forget anything so everyone is clear on it.
  • Make the documents easily accessible to all your team members: we'd recommend to store it all in the same place such as the handbook storage we offer in Charlie
  • Review the policy as time goes by: avoid getting stuck with the same policy as you grow, and make sure you iterate on it

Managing annual leave tip 7 – use the right tool to deal with queries

Communication and transparency are key when it comes to managing annual leave.

That's why you should choose the right tool to automate your time off process and make sure everyone is up to date with their team members' whereabouts and holidays.

That will likely avoid frustration and blockers when team members are working on a project together.

If you, for example, choose to use HR software, your whole company will have access to a calendar that outlines time off, with the option to filter it by department.

That way, no unexpected holiday clashes are possible, and everyone can efficiently work around planned annual leave.  

The right tool to manage annual leave will also be crucial in your HR strategy to iterate your HR policy. With built-in reports like the ones in Charlie, you'll be able to spot issues straight away and address them as soon as possible.

Finally, a self-service system where team members can submit their holiday requests automatically will save you plenty of time and allow you to focus on more impactful work without neglecting the foundations of your business.

Maybe try it yourself to find out whether this is the right fit for you – get a 14-day free trial today.  

Click here to start a 14 day free trial

You can also check out our complete guide on leave management software to understand what's the best solution for you and your business.