My clients love their employees. Their employees love working for them so much, they hardly ever take holidays...
So when it's time for those employees to leave the company, my clients have to pay out their entitlements, including unused holiday leave. And that figure can be huge.
Some of my clients have employees who have years of leave owing to them.
Think of the hit your bank account will take if you have to pay out all that leave at once
Tip 1: have a company policy around Holiday Leave
It doesn't have to be too rigid or authoritarian, but encourage your employees to take regular holidays. That will keep your Annual Leave liability under control.
I know it's painful for many small businesses when a key employee goes away on holidays, but maybe less painful than paying out thousands of dollars when they leave your employ.
Tip 2: get your accountant to calculate the Annual Leave Liability
A good accountant can do this for you every year. You can then be mindful of the amount of cash you could potentially have to fork out when a long-serving employee leaves.