Why the Grace Period is a bad idea for businesses

Labor Law Discipline 8 min read , November 14, 2020

What does the law say about the grace period? Is it a good idea to have them? What can go wrong when you implement these types of policies? How does it affect tardy employees? How do we manage the downside of this policy? We tackle these in today’s article.

If you have this policy, take this opportunity to reexamine if it is still working for you. If you don’t have a policy like this in place, read this and see how it will fit into your systems if ever.

Grace periods are pretty common among companies here in the Philippines. It's so common that some employees mistakenly believe that it is one of the standard benefits accorded to them by the labor code.

Morning in Paris Metro
Photographer: Fabrizio Verrecchia | Source: Unsplash

It usually starts out like this: the management notices that employees have been getting to work later and later than what is required. When asked why they come in late, the employees cite valid reasons such as horrendous traffic, road accidents, closure of roads due to parades and so on and so forth. Management sees that these are valid reasons for their tardiness and decides to step in with a new policy to save the employees from these external threats.

Thus, the grace period was born. The usual grace period goes like this:

Our reporting time is at 9:00am, but if for any reason you come in later than the time we all agreed upon, that’s cool with us. You can have about 10-15 minutes after the reporting time to get settled in. However, just so you don’t abuse us, we limit the total grace period for the month at 60 minutes. You can’t go beyond that.

How it gets mutated

For the record, I applaud employers who care for the well-being of their employees. They go out of their way to see how they can improve the lives of employees. However, part of our jobs as the legal team is to audit and see if these benefits are prone to abuses. Unfortunately, the grace period is usually at the top of the list. There are 2 major negative effects of grace periods that we see.

First, it turns the employees lax. Since there is a grace period, the employees will put down their defenses and usually take a passive stance towards traffic. No need to take precautions or wake up early. They think, “Anyway, there’s a grace period buffer to protect me. I’m good.” The policy sometimes discourages the employees from taking the right precautions.

Second and more unfortunate for the employer, it paves the way for abusive employees to game the system. They actually make a game out of it to see how far they can push the benefit. “Oh, traffic is terrible this morning. What they heck, it’s close to the end of the month and I still have around 30 minutes left on my grace period count.” The employees therefore can come to work early, but because of the grace period, they can now choose not to.

Things have now come full circle. You have now unknowlingly legitimized tardiness within your ranks. Congratulations.
Running in an airport
Photographer: Andy Beales | Source: Unsplash

Some things to think about before it spirals out of control

I would like to present a couple of points that everyone should consider regarding this policy, whether you're thinking of implementing this, or thinking of modifying your existing policy.

1. You are not required by the law to have this

“Attorney, my HR mentor passed this policy onto me. I hold it sacred.” Sure, you can do that. But all that tells me is that your company has chosen to exercise its management prerogative to provide this grace period. It was your choice to do so. It was not required by the law.

Again, there is a difference between implementing something that is required by the law such as service incentive leaves, holiday pay, probationary periods and overtime pay versus something that you thought up and implemented. The first is mandatory, the second is voluntary. Don’t make the mistake of thinking that you are required to make allowances for late employees.

Why do I mention this?

When implementing the policy, you have to be coming from the right mental and emotional space.

The way you implement things when you feel that it is required versus when you know that you are providing things voluntarily and out of concern for your employees is vastly different. In the first, you may feel powerless and you have no choice. In the second, you know that you can always step in when abuse of your generosity is being apparent. Know where you’re coming from and reclaim your power as an employer.

2. You’re just moving expectations anyway - move it to the proper location

The reporting time is arbitrary. This is something that you all agreed to. Even the 9am reporting time? All fiction. There is nothing in the labor code which requires you to start work at that time. You can start it at 11:11 am officially if you want to just because you like how the numbers line up. It just so happened that from tradition, the usual work time started at 9am so it got carried over between businesses.

Since you get to pick the time, why not set the standard and hold everyone to it? If you feel that 9am is too unrealistic given the traffic situation right now, why not consider amending it? I will write about some ways to modify this in a later article.

3. In extraordinary circumstances that truly merit a grace period, you can always issue a case-to-case amnesty

Remember Ondoy and the massive flooding it caused? Or how about getting stuck in traffic because of a parade or inauguration of a building or statue? Or how traffic crawls to a standstill whenever rain pours in the Metro. We've all been there, and we know how powerless it can make you feel.

When these external things happen, you always have the power to step in as the employer and grant a specific amnesty towards all the people who were affected by the event. Essentially, this order nullifies any penalties for those who came in on a particular day because the management is recognizes that the tardiness was beyond their control. This again is an exercise of your management prerogative.

Let's tackle some questions

"But attorney, how is this different from the grace period? Isn't this the same thing?"

Good question. The grace period is a blanket approval of exemptions for your employees. In this case, you reserve the right to grant it on a case-to-case basis. This is better in my opinion because it forces your employees to take precautions because they don't have a policy to fall back on. They will do their best to get to work on time.

"Attorney, isn't this inefficient? Why not just have the policy in place so that you don't have to be bothered to make a call every time something happens?"

As a leader, I think you want to be able to assess situations and make a call. That way, you have a better pulse on what's happening in your business and adjust accordingly. Also, you get to be sensitive to the employees' situation whether the tardiness was brought about by "acts of God" or the employee doing "acts of nod" (a.k.a. oversleeping). You get to diagnose and decide.

"Attorney, what are some metrics I can use to decide?"

Again, good question. This older article of mine may help so be sure to check it out: "If there’s a flood, can I get the day off? "

4. Unfair for those who take the effort to comply with the expectations they agreed to

When some people are late, statistically, there will be some people who come to the office on time. Right? When you continually absolve the late comers, have you ever stopped to consider what message that sends to the people who take the effort to come on time?

When you absolve rule-breakers, it sends the following messages to the rest of your team:

  • Your efforts are not appreciated.
  • Coming to work on time doesn't really matter.
  • There are no consequences in this workplace.
  • We do not hold people accountable.

So, if you're thinking that absolving tardiness may be a small deal, think again. It may have minimal consequences in the short term, but also balance it out with the culture you're building for the long term.

5. Delays the “actual start” of the work day

When workers come in late at the start of the day, it may create a ripple effect for the rest of the day. For example, their delayed output in the morning can be integral to something that another department is working on. And that department's output is something that another department is working on.

The "tiny minutes" taken from the morning actually takes away more minutes down the line for everyone. That's why grace periods can be deceptive. They seem innocuously small things but I invite you to take a look how it affects the whole day's workflow.

6. Makes computation of attendance and tardiness hell at the end of every month.

When you implement the grace period, it increases the work that payroll has to do at the end of every pay period. Why? They now have to tabulate the days present, the days absent, the days tardy, and the cumulative grace period allowances if the actual tardiness exceeded the allowance. So, take this extra work into account before you decide to implement a grace period.

That's it!

So that's my short analysis of the Grace Period and why it should be revisited. Hope that helps you make decisions whether to implement it or not. If you're going to make some changes with regard to your current policies, run this thru your legal team to make sure you're not violating any laws or principles.

Stay tuned in the next articles where I give out suggestions on what to implement instead of grace periods to help you adjust or be flexible in light of Metro Manila's traffic situation.