How to compliantly manage vacations with a global team

Summertime is fast approaching and with it the season where many employees go on vacation. Empty offices might mean lower utility costs, but for payroll and HR, the summer months often come with additional work, even more so when the team is globally distributed.

Every country has different rules surrounding paid time-off. In Europe, for instance, most countries have a statutory minimum leave requirement that ranges between 20 and 30 days off per year. In the United States, on the other hand, there is no legal entitlement to paid vacation days.

For payroll and HR, the challenge is to ensure compliance across all the countries where the business has employees, accurately calculate holiday pay, and keep track of employee absences to prevent workflow disruptions.

Read on as we dive deep into the ins and outs of managing vacations for global teams from a payroll, HR, and compliance perspective.

Employees should take regular vacations. Taking time off work helps prevent burnout and enhances employee motivation and productivity. For payroll and HR, however, managing employee vacation time creates additional work.

Here is an overview of the different implications holidays and vacations can have for HR and payroll teams:

• Need to adjust the payroll schedule to avoid delayed payments if payday falls on a public bank holiday,

• More complex payroll calculations due to special bonus payments and holiday pay,

• Additional work checking that requested time-off corresponds to the employee’s accrued holiday entitlement (also important for PTO payout),

• Difficulties coordinating employee schedules to avoid disruptions to the team’s productivity,

• Staff shortages in the payroll and HR department because employees might also take leave during typical vacation periods,

• Need to observe company policies regarding vacation time freeze for new joiners,

• Legal regulations regarding how vacation needs to be taken (e.g. that employees must take a certain number of days off in a row at least once a year),

• Internal controls that employees use their leave entitlement as they are supposed to, and

• Cases where employees fall sick or need to work while on vacation.

When it comes to managing employee leave, payroll and HR teams need to keep track of working hours, hourly wages, legal requirements, and more. When working with a global team, the list of challenges and hurdles grows even bigger. Challenges in managing vacations for international teams include cultural and time zone differences, operational concerns, and compliance issues.

Time zone discrepancy

Collaborating across different time zones is always a challenge. Time zone discrepancy also influences leave management in globally distributed teams. For one thing, different time zones slow down PTO request and approval processes. For another thing, project and task handover might need to happen asynchronously, which might lead to questions being left unanswered.

Country-specific leave types and requirements

Each country has its own time-off and vacation practices. This includes the legal framework surrounding employee leave and everything that goes with it. Vacation-related country-specific differences include:

• Minimum annual leave entitlement,

• Rules regarding PTO accrual and PTO freeze for new hires,

• Holiday pay and bonuses, and

• Specifications on how leave must be taken.

Variation in the number and dates of public holidays

In many countries around the world, public holidays are paid days off and hence represent an integral part of an employee’s annual time-off entitlement. The problem is, however, that each country defines its own public holidays.

Some celebrations are public holidays in many countries around the world, such as the holiday season at the end of the year. But very often, public holidays are unique to the country in which they are observed (e.g. King’s Day in the Netherlands or July 14 in France).

Keeping track of public holidays across different countries can be challenging, especially for countries like India where public holidays differ from one province to the next.

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Different cultural perception and customs

Different countries have different holiday calendars and laws surrounding how and when paid time-off must be taken. Another aspect that is radically different between countries is the cultural perception of vacations. Team members from different countries are likely to have a different vacation ethos that reflects the vacation customs that are followed in their respective country.

Views on the importance and length of vacations vary greatly between countries. In France, for instance, almost the entire economy comes to a standstill during the vacation period in the summer months. In Australia, regularly taking time off work and going on extended vacations is also deeply rooted in the country’s work ethos—unlike in the United States where taking time off work remains somewhat of a privilege in certain industries till this day.

So, how can payroll and HR teams keep track of their global team’s PTO requests, ensure business continuity during popular holiday periods, and accommodate divergent cultural perceptions and norms? Here are a few best practices businesses should follow.

• Implement automated time and attendance tracking to avoid time-sheet chaos.

• Encourage employee cross-training so that coworkers can fill in for one another.

• Set clear expectations surrounding vacations and paid time-off.

• Work out a detailed coverage plan and have employees prepare handover documents for colleagues.

• Encourage vacations to prevent burnout and non-compliance with statutory regulations.

• Promote cross-cultural competence and make an effort to understand how different cultures perceive vacation time.

• Create a company-wide PTO calendar with each country’s public holidays and periods where employees in the respective country typically take extended vacations.

• Ask employees to update their slack statuses and set up out-of-office messages.

• Gather feedback from team members to find out what can be improved.

• Create a global PTO policy.

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Managing employee vacation across different countries and time zones might be challenging from an operational point of view, but even more so with regard to compliance.

As mentioned before, the rules and laws surrounding employee vacation differ from country to country. Vacation management for global teams therefore requires payroll and HR teams to comply with the regulations in each country. Here are a few tips on how to accomplish this.

• Do your due diligence and research local rules and requirements in great detail.

• Double-check requirements regarding holiday pay or special holiday bonuses.

• Create a global PTO compliance database and keep it up to date.

Consult with experts if needed. A local Employer of Record can help you comply with local vacation laws and respond to cultural expectations.

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