How leave is applied based on setup scenarios | Payroll Guide

Overview

To get a better understanding of how the leave settings work based on your setup, we have provided several examples below. These examples are what to expect when you disable the Limit Leave Accruals to the First Pay Run for the Period setting. To read further information on the general setup of your leave categories, refer to the following article.

You can only select this option if you have disabled the Leave Category Automatically Accrues setting and you set the allowance to either Standard Weeks per year or Standard Days per year. Enabling this option will allow leave to accrue in the first pay run for the pay period. It will also allow you to cap any further accrual in pay runs with the same start and end date. The article will cover the following topics:

Example one  

Setup

  • Leave accrual type: Automatically accrues on an ongoing basis.
  • Cap: Accruals for leave category are not limited.

Result

Employee will accrue leave as per the accrual rate. Leave will continue to accrue on an ongoing basis until the termination of the employee's employment. 

Example two

Setup

  • Leave accrual type: Automatically accrues on an ongoing basis.
  • Cap: Accruals for leave category limited to a maximum of 20 hours.

Result

When an employee’s total leave balance reaches 20 hours, then leave will no longer continue to accrue. A message will appear in the pay run; advising this has occurred. When an employee takes leave and their balance drops below 20 hours, leave will start accruing again until the balance reaches 20 hours. Opening leave balances are considered for capping purposes.

Example three  

Setup

  • Leave accrual type: Automatically accrues based on the employee's leave year.
  • Cap: Accruals for leave category limited to a maximum of 20 hours.
  • Carry Over: Entire balance.

Result

When an employee’s total leave balance reaches 20 hours for the leave year, then leave will no longer continue to accrue. A message will appear in the pay run, advising this fact. Upon commencement of another leave year, the entire leave balance will carry over and the employee will be allowed to accrue a further maximum of 20 hours. The accrual will recommence in the pay run dated after the employee's leave year.

With this setup, regardless of how much leave an employee takes during a leave year, the amount accrued will never exceed 20 hours per leave year. Please bear in mind we do not consider opening leave balances for capping purposes. 

Example four

Setup

  • Leave accrual type: Automatically accrues based on the employee's leave year.
  • Cap: Accruals for leave category limited to a maximum of 20 hours.
  • Carry Over: Maximum of five hours.

Result

When an employee’s total leave balance reaches 20 hours for the leave year, then leave will no longer continue to accrue. A message will appear in the pay run, advising you of this fact. Upon commencement of another leave year, the employee will be allowed to accrue a further maximum of 20 hours. The accrual will recommence in the pay run dated after the employee's leave year.

Additionally, upon commencement of a new leave year, only a maximum of five hours of leave, accrued from the previous year, will carry over. If an employee's balance is greater than five hours, you will need to adjust the balance in your pay run. 


With this setup, regardless of how much leave an employee takes during a leave year, the amount accrued will never exceed 20 hours per leave year. Please bear in mind we do not consider opening leave balances for capping purposes. 

Example five

Setup

  • Leave accrual type:Automatically accrues based on the employee's leave year.
  • Accrue in advance: Yes.
  • Cap: Accruals for leave category limited to a maximum of 152 hours.
  • Carry Over: Entire balance.

Result

When an employee's commencement date = the leave year date.

the total amount of leave owed to the employee within the leave year will be paid upfront in the employee's first pay run. We will show a message in your pay run to indicate this fact.

The employee will then no longer continue to accrue leave during the leave year. Upon commencement of the next leave year, the entire leave entitlement will again be added to the employee's balance in the pay run dated after the employee's leave year.

Result

When an employee's commencement date is after the leave year date.

The difference here is that the employee will receive an upfront pro-rata amount of the annual entitlement in the first year. The reason for this is because the employee has only worked a part of the leave year. From the second leave year and thereafter, the employee will receive the full upfront leave amount. 

FAQs

  What date does the platform use when calculating the leave date?  

The platform will use the employee’s start date. You can find this date on the Employee File Details page. You can, however, override this at an employee level via the employee’s Leave Allowances screen. The anniversary date, set within the employee’s details screen, has no impact on the employee’s leave year date.

  What happens when a user creates a new leave category part way through the leave year that is set to accrue in advance?  

The first pay run processed after you create the leave category will accrue an upfront pro-rata amount of the leave entitlement. Leave will then no longer accrue for this leave type until you process a pay run for the pay period after the next leave year.

  What happens when a user updates an existing leave category part way through the leave year so that it is now set to accrue in advance?  

We do not support you turning on the Accrue in Advance feature for an existing leave category. The reason is you are changing an existing leave category from accruing on an ongoing basis to accruing based on a leave year. As the employee has already accrued leave historically, there is no way for the platform to know when the leave year started for the historic leave accrued. As a result, the platform will not correctly calculate the difference between what has already accrued and the further amount that needs to be accrued upfront.

  How does the leave adjustment work in the pay run when the next leave year commences?  

You add the leave type to each employee's pay run record in the first pay run processed after the leave was setup, or the employee's first pay run for new employees. After that, we use a negative leave adjustment to reverse out the old year's balance once the new leave year's balance accrues for the employee. The accrue will happen in the first full pay period after the employees anniversary date each year.

The settings you put in place for this leave category determine how/if this adjustment will show up on the pay slip so:

  • If you did set the leave category settings to hide the accruals and balances, the leave adjustment we add to clear out /add new leave will not be displayed on the pay slip (at all).
  • If you did not set the leave category settings to hide the accruals and balances, the pay slip for the pay run where we add the leave adjustment to clear out the old leave balance and add the new leave accrual will display in the Leave Details section on the pay slip as:
    • Leave Accrued: 38 hours.
    • Leave Taken: 38 hours.
    • Balance: 38 hours.

Therefore, if you do not want to see the adjustment leave show up on the pay slip unless the employee takes can request this type of leave, you just need to adjust the leave category settings to hide accruals and balances.

You will find the leave category settings under the Pay Run Settings heading on the payroll settings tab on the payroll dashboard. Click on the leave category to expand the settings and tick the boxes to hide accruals and balances.

  If leave is set to accrue in advance, why didn't my employee accrue the full amount?  

The way the accrue in advance leave calculation works is that it looks at three things:

  1. The amount of hours of leave that needs accruing.
  2. The time that it needs accruing over i.e. a year.
  3. The pay period schedule, i.e. weekly, fortnightly, monthly, that the accrual will appear in.

So for example, if you are wanting your employees to accrue 76 hours which is two weeks per year of a particular leave category in a weekly pay run, the leave calculation is 76 (hours) / 52 (weeks) = 1.4615 hours per week. And since the leave you set the leave to accrue in advance, you would expect the full 76 hours to accrue for employees getting paid 38 hours in the weekly pay run. 

However, the leave does accrue in advance using the above calculations except for the first week, i.e., the pay run that the accrual appears in. What this means is that if an employee does not work the full 38 hours, or if the pay category used to pay the employee is not set to accrue leave, the platform will pro-rata the accrual based on the actual hours paid against pay categories that are set to accrue leave.

For example, if in the pay run the employee only worked 35.5 hours of pay categories that accrue leave, the calculation would be 35.5 (hours) / 38 * 1.4615 = 1.3653. The rest of the calculation would be 1.3653 (hours) + (51 (remaining weeks) * 1.4615 (the 'standard' weekly accrual) = 75.90385 hours. If this happens the easiest solution is to edit the leave accrual by clicking the pencil icon within the pay run and entering the desired total accrual amount. 

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