Why Leave Liability Still Matters—Even in a Changing Workforce
Today’s employees may no longer stay with one employer for life—but that doesn’t mean long-term benefits have disappeared. Many businesses still carry significant leave liabilities tied to historic employment agreements and long service patterns. The way we calculate and model these obligations has changed—and if you’re not updating your assumptions, you could be over- or under-reserving, putting your organisation at financial risk.
Leave Liabilities: A Legacy That Still Needs Attention
In decades past, long service and retirement benefits were common. Employees would stay 30–40 years with one employer, accumulating entitlements as part of superannuation schemes or enterprise agreements. While workforce dynamics have shifted—especially for younger generations—the liabilities from these arrangements remain on many balance sheets.
These obligations can’t be ignored. Even if fewer employees today will qualify, the ones who do can have significant payouts. And with today’s changing employment trends, the assumptions used to model these costs must be updated to reflect real-world behaviour.
The Risk of Getting It Wrong: Under- or Over-Estimating
Leave liability valuations rely on assumptions: how long staff will stay, when they’ll retire, and how much they’ll earn when they leave. If those assumptions are outdated, your forecasts could be off—sometimes significantly.
Underestimating can lead to surprise payout shocks, where funds aren’t available when benefits come due.
Overestimating means tying up funds that could be better used elsewhere, reducing liquidity and operating efficiency.
For CFOs, HR leaders, and finance teams, the pressure to “get the number right” is growing. Boards, auditors, and regulators are asking more questions—and they’re right to do so.
Workforce Behaviour Has Shifted—Has Your Model?
At EriksensGlobal, we’ve seen how workforce movement patterns are evolving. Employees change jobs more frequently. Average tenures have shortened. Resignation rates vary widely by age, role, and industry. These patterns fundamentally impact the probability of benefit payouts—and must be factored into your liability calculations.
That’s where actuarial expertise comes in. Our team, led by Colin Downie, is pioneering updated leave liability modelling using real-world data. With international experience and a deep understanding of public and private sector schemes, Colin applies tailored assumptions that reflect your actual workforce.
Why This Matters for Finance, Audit & Strategy
Accurate liability modelling isn’t just about ticking a compliance box. It affects strategic decisions:
Budgeting: Knowing what’s coming allows for better resource planning.
Auditing: Accurate models withstand scrutiny from internal and external auditors.
Governance: Boards can make informed decisions with confidence.
Valuations: Especially important around financial year-end (e.g., 30 June or 31 December), when liabilities appear on balance sheets.
Whether or not you fund your liabilities in a separate reserve, you still need to account for them—and that means using actuarial inputs that reflect the current and future state of your workforce.
Time for a Reassessment?
If it’s been more than a year since your last leave liability valuation, or if your workforce has seen significant shifts (like restructures, hybrid work adoption, or demographic changes), it’s time to revisit your model.
We work with government departments, corporates, and other large employers to deliver fit-for-purpose leave liability assessments. Our valuations are designed to withstand scrutiny—from auditors, boards, and even Treasury.
Reach out for more insights
If you’re ready for a modern approach to leave liability, visit eriksensglobal.com or reach out to our team. We’d be happy to talk through how your organisation can benefit from more accurate, relevant, and defensible liability forecasting.