How to Create a Simple Leave Policy for a Small Business

In a small company, leave is often handled on trust. Someone asks, the manager says yes, and that's that. It works until two people want the same week off, or someone asks how many days they have left and nobody knows.

A short, clear leave policy fixes most of this. It doesn't need to be long or full of legal language. It just needs to answer the questions people actually ask.

Here's how to put one together.

Step 1: Decide your leave types#

Start by listing the kinds of leave you offer. Most small businesses have some mix of:

• Annual or paid leave for holidays and personal time
• Sick leave
• Casual leave for short, unplanned needs
• Maternity and paternity leave
• Unpaid leave (leave without pay)

Check your local labour law first, because many countries set minimums for some of these.

Step 2: Set how much of each type people get#

For each leave type, decide:

• How many days per year
• Whether it's given all at once or earned month by month
• Whether unused days carry over to next year
• Whether new joiners get the full amount or a pro-rated share

Write the numbers down. Vague answers like "a reasonable amount" cause arguments later.

Step 3: Explain how to ask for leave#

People need to know how to request leave and how much notice to give. For example:

• Planned leave: request at least two weeks in advance
• Sick leave: inform your manager on the same day
• Long leave: discuss with your manager first, then apply

Ask everyone to apply in one place. If requests come in by email, chat and phone, some will get lost.

Step 4: Decide who approves#

In a very small team, the owner may approve everything. As you grow, it usually makes sense for the direct manager to approve first. For longer leave, you might want a second approval from HR or a department head.

This is called a multi-level approval. It sounds formal, but it simply means the right people see the request in the right order.

Step 5: Say what happens with half days and unapproved absence#

Two things cause a lot of confusion, so spell them out:

• Half days. Can people take half a day? How does it count against their balance?
• Absence without approval. Usually this is treated as unpaid leave. Say so clearly.

Step 6: Connect leave to attendance and payroll#

This is where many small businesses slip. Leave is approved in one place, attendance is tracked in another and payroll is done in a spreadsheet. Then someone gets paid for days they were on unpaid leave, or docked for leave that was approved.

Approved paid leave should count as a paid day. Unapproved absence should flow into payroll as leave without pay. If your tools do this automatically, payroll gets a lot easier. We explain how in automating payroll with attendance and leave data.

Step 7: Share it and keep it simple#

Put the policy somewhere everyone can find it, and walk new joiners through it in their first week. Review it once a year.

A simple template to start from#

Annual leave: 18 days per year, earned monthly. Up to 5 unused days carry over. Sick leave: 8 days per year. Inform your manager on the day. Requests: Apply in the HR system at least 2 weeks ahead for planned leave. Approval: Your manager approves first. Leave over 5 days also needs HR approval. Half days: Allowed, counted as 0.5 days. Unapproved absence: Treated as leave without pay.

Change the numbers to fit your company and local law, and you've got a working policy.

Managing leave in LiteHRM#

LiteHRM lets you create your own leave types and allocate them to employees for set periods. Employees can check their balances and apply for leave from the web or the mobile app. Requests can go through multi-level approval, half-day leave is supported, and approved leave syncs with attendance so payroll stays accurate.

Have a look at the leave module in the live demo.