The price of unused holiday: December's hidden cost

In today's fast-paced business environment, the challenge of managing annual leave is trickier than ever. We caught up with Breathe customer, Tracey Murphy from Tritech, a leading engineering firm, who highlighted a problem that’s being overlooked. The impact of unused holiday on SMEs, particularly in the engineering sector. This issue is more than just an HR headache; it’s a significant industry blocker that can disrupt operations and hit productivity, hard.

 

Skip to: 

• The holiday backlog crisis in engineering
  
• The bigger impact across industries 
• Financial losses and operational inefficiencies 
• Solutions to prevent the holiday backlog 

 

The holiday backlog crisis in engineering

The engineering sector tackles tight deadlines, project-based work and the need for continuous operations. Unlike some other industries that can afford to slowdown at the end of the year, engineering is one that faces unique challenges when employees rush to take unused holiday leave in December. This creates an ‘end-of-year bottleneck’, where businesses are forced to shut down or operate at reduced capacity due to the sudden exodus of employees on leave. 

Tracey Murphy, HR Manager, shared how this has become a significant operational hurdle for Tritech:

“In the past few years, I've seen a pattern where most engineering staff rush to use their holiday entitlement in December. This results in project delays, increased pressure on the remaining staff, and, in some cases, financial penalties due to missed deadlines. It's a domino effect that disrupts the entire operation." 

- Tracey Murphy, HR Manager, Tritech

 

The bigger impact across industries 

While the engineering industry is particularly vulnerable to this issue, the holiday backlog crisis isn‘t limited to just this sector.  

Across various industries, businesses are grappling with the challenges of unused holiday leave. In the recent Breathe Holiday Report 2024, there is a huge problem with employees not taking their full annual leave entitlement throughout the year, which can ultimately lead to a surge of holiday requests at the end of the year – leaving businesses incredibly vulnerable.

This influx can result in forced downtime, missed opportunities, and a loss of productivity that extends well beyond the holiday season. For SMEs, the impact can be breaking, as they may not have the resources to absorb the shock of high numbers of staff being away.  

Financial losses and operational inefficiencies 

We don’t want to say it – but the hard truth is that the financial implications of this crisis are significant. Many businesses, predominantly engineering firms, face costly delays and disruptions due to the forced downtime that results from the holiday backlog. These could include: 

• Missed deadlines: Projects that are scheduled for completion at the end of the year are often delayed, leading to missed deadlines  
• Penalties and fines: If understaffing leads to non-compliance with industry regulations, it could result in fines or penalties, further straining financial resources. 
• Increased pressure on remaining staff: With a significant number of the workforce on leave, the remaining staff are often stretched thin, leading to burnout and decreased productivity. 
• Cost of restarting projects: Once operations resume, there is a cost associated with restarting projects that were put on hold, from realigning teams to catching up on lost time. 
• Delays in delivery: If an SME can't fulfill orders or services on time due to a lack of staff, it could lose customers or contracts. This can damage reputation and even lead to lost revenue. 
• Inability to scale: An understaffed SME might be unable to take on new projects or expand its operations, limiting its growth potential.  
• Increased costs: When the existing workforce is overworked, it can lead to higher overtime pay, increased absenteeism, and potential burnout. This can increase labor costs and reduce the overall profitability of the business. 
• Risk of operational shutdown: In critical sectors (e.g., manufacturing, healthcare), understaffing can directly affect the ability to maintain operations safely and efficiently, leading to partial or complete operational shutdowns.
  

Solutions to prevent the holiday backlog 

Addressing the holiday backlog crisis requires a proactive approach. Companies can implement several strategies to mitigate the impact: 

• Flexible leave policies: Encourage employees to take their leave throughout the year by implementing more flexible leave policies. This could include the option of carrying over leave to the next year or offering incentives for employees to take leave during off-peak periods. 
• Regular leave monitoring: Utilise a software system to monitor and manage leave more effectively. Automated systems can help track leave balances, send reminders to employees, and alert managers when a backlog is building up. 
• Encourage a healthy work-life balance: Promote a culture that values work-life balance. Encourage employees to take their leave regularly, highlighting the benefits of rest and rejuvenation for overall productivity and wellbeing. 
• Leave buy-back: Offer a leave buy-back option where employees can sell back a portion of their unused leave for extra compensation. This can reduce the number of employees taking leave simultaneously, helping to maintain a balanced workflow. 
• Temporary workforce expansion: If possible, hire temporary staff or seasonal workers to handle the increased workload during peak holiday periods. This can help maintain productivity levels without overburdening the core team, ensuring that essential tasks are completed on time. 
• Enhance internal comms: Improve internal communication to ensure that everyone is aware of upcoming leave schedules. Clear communication helps in planning workloads and prevents last-minute surprises that could contribute to a backlog. 
  

The issue of unused annual leave is more than just an admin problem; it’s a significant business risk, especially for industries where ongoing operations are critical. By recognising the hidden costs of the holiday backlog and taking proactive steps to address it, businesses can avoid the end-of-year bottleneck, ensuring smoother operations and sustained productivity. 

The holiday backlog phenomenon is a silent disruptor, but with the right strategies, it can be effectively managed, allowing businesses to thrive even during the busiest times of the year. 

Discover how Breathe’s holiday management tools can help you.