The display of pay slip leave accruals can be set at two levels:

• Payroll settings level under the pay slips menu. This setting impacts all leave categories.

• Leave category level where individual leave categories can be set to hide the accrual and/or the balance from the pay slip. This setting impacts the specific leave category where the setting is located. 

• The display of pay slip leave balances can be set at one level and that is at the leave category level. This setting impacts the specific leave category where the setting is located. 

Settings and associated display outcomes

Hide leave accruals for all leave categories at payroll settings level

• Payroll settings > Pay slips > Show leave accruals unticked.
• Leave categories > Specific leave category > Hide accruals from pay slips unticked.

• Accrued column not displayed for any leave category.
• Annual holidays accrued line not displayed.

Show leave accruals for all leave categories at payroll settings level

• Payroll settings > Pay slips > Show leave accruals ticked.

• Leave categories > Specific leave category > Hide accruals from pay slips unticked.

• Accrued column displayed for all leave categories.
• Annual holidays accrued line displayed.

Employment Hero Payroll pay slip leave balances differentiate annual holidays accrued from annual holidays entitled.

Annual holidays accrued is a financial value i.e. 8% of the employee’s gross earnings since latest annual holidays anniversary.

Annual holidays entitled represents the conversion from annual holidays accrued i.e. the financial value, to units of time i.e. 4 weeks of annual holidays.

It is important to differentiate both concepts to comply with the Holidays Acts 2003.

While many payroll platforms in NZ only allow payrollers to set annual holidays on an ongoing hourly accrual, this is not compliant with the Holidays Act 2003 which defines an annual holiday entitlement as 4 weeks. In Employment Hero Payroll, best practice is to set the leave category annual holidays to accrue in weeks based on the employee’s leave year (anniversary) so that the annual holiday accrual converts to 4 weeks of annual holidays entitled on the employee's annual leave anniversary. All screenshots below display best practice set up for the leave category annual holidays. Setting annual holidays on an ongoing hourly accrual will lead to incorrect pay slip leave balances.

Note that in all cases outlined below, Payroll settings > Pay slips > Show leave accruals is ticked.

• Hide accruals from pay slips.
  • Accrued column displayed for all leave categories.
  • Annual holidays entitled accrued displayed as N/A.
  • Annual holidays accrued not displayed.

Note that with this option, a simple calculation will enable employees to have visibility of the annual holidays entitled accrued value.

• Hide accruals from pay slips
• Hide balances from pay slips
  • Accrued column displayed for all other leave categories.
  • Annual holidays entitled not displayed.
  • Annual holidays accrued not displayed.

• Hide accruals from pay slips.
• Hide balances from pay slips
  • Accrued column displayed for all leave categories
  • Annual holidays entitled, accrued, taken and balance displayed.
  • Annual holidays accrued displayed.

For annual holidays, the following settings must also be ticked for the annual holiday accrued line to show in pay slip leave balances.

• The "Leave entitlement to start after"
• "Standard Allowance" must be set to Standard weeks per year or Standard days per year in annual holidays settings (as opposed to hourly).

While the legal definition of an annual holidays accrual is 8% of gross earnings since the employee’s latest annual holidays anniversary, employees may not be able to reconcile a dollar value with units of time. As a result, Employment Hero Payroll applies a calculation to estimate the annual holidays accrued value in weeks. Payrollers can refer to the leave liability report from the report menu for the exact financial value of the employee’s annual holidays accrual.

Calculated example:

Employee annual holidays anniversary: 1/12/2024

Fortnightly pay run end date: 12/01/2025

Calendar days from 01/12/24 to 12/01/25 = 43

(4 weeks entitlement / 365 calendar days) x 43 calendar days = 0.47 weeks.

As each pay run contains the same quantity of calendar days, the annual holidays accrual will increase in a linear way i.e. in the above example the annual holidays accrual will increase by (4/365)*14 calendar days = 0.1534 week with each pay run. 

Annual holidays entitled value calculations

As annual holidays is anniversary-based, a new annual holidays entitled accrued value is calculated every time the employee reaches their annual leave anniversary aka leave year start date. The employee’s leave year start date is displayed in the employee leave allowances screen.

Annual holidays entitled accrued

The annual holidays entitled accrued value is the employee’s latest annual holidays entitlement at latest anniversary. This value will not be re-calculated or changed until the employee’s next annual holiday anniversary.

Annual holiday entitled taken

The annual holiday entitled taken value is the sum of annual holidays taken by the employee since her/his latest anniversary. This includes entitled annual holidays taken and annual holidays accrued aka in advance of entitlement. When annual holidays accrued i.e. in advance of entitlement is taken, it is always applied as a negative against annual holidays entitled accrued. This reconciles with the employee’s leave balances screen and is in line with the reversal of annual leave taken in advance of entitlement that will be processed on final pay when the employee is final paid with a negative annual holiday entitled balance. Therefore, the annual holidays accrued line will never show a taken value but will only ever show a positive accrued value. This is in line with the concept that an annual holiday accrual is only a financial value (which cannot be negative) until it becomes entitled when it becomes a time value (typically 4 weeks).

To best understand pay slip leave balances, payrollers should download the employee’s leave history report into excel and add a running balance column. Leave accrued always applies as a positive to the running balance (green cells from below screenshot). This includes the adjustment and carry forward at the time of anniversary. On the other hand, leave taken always applies as a negative. 

In the above example, no annual holiday has been taken since the employee’s latest annual holiday anniversary. Therefore, the annual holiday entitled taken value is zero. The annual holiday entitled balance equals accrued value minus taken value.

In the above example, the employee has been taking annual holidays since his latest anniversary (06/11/2024). The sum of annual holidays taken since latest anniversary shows under the taken value. 

Impact of incorrect set up of annual holidays on pay slip leave balances

When the leave category annual holidays is set up to accrue ongoing hourly as per below screenshot, the leave category is no longer anniversary-based and therefore, the system loses the concept of entitled Vs. accrued which is fundamental to the Holidays Act 2003. This leads to a non-compliant set up and incorrect pay slip leave balances.

When annual holidays is set up to accrue on an ongoing basis, the system will follow the rules of calculation of all other leave categories. It will sum ALL annual leave accruals and ALL annual holidays taken from the employee’s leave year start date stated in the employee’s leave allowances. The balance will be the difference of both values.

2. All other leave categories

We will use sick leave as an example. All leave categories other than annual holidays will follow the same logic.

Note that in all cases outlined below, Payroll settings > Pay slips > Show leave accruals is ticked.

• Hide accruals from pay slips.
  • Accrued column displayed for all leave categories.
  • Sick leave entitled accrued displays N/A.

Note that with this option, a simple calculation will enable employees to have visibility of the sick leave accrued value.

• Hide accruals from pay slips.
• Hide balances from pay slips
  • Accrued column displayed for all other leave categories.
  • Sick leave not displayed.

All other leave categories value calculations

The accrued value for all other leave categories is the sum of all leave accrued since the employee’s leave year start date for the specific leave category.

The taken value for all other leave categories is the sum of all leave taken since the employee’s leave year start date for the specific leave category.

The balance is the difference between the accrued and the taken values. 

The same auditing process can be used for all other leave categories as for annual holidays i.e. download the employee’s leave history report in excel. Sum all leave accrued and all leave taken from the employee's leave year start date for the leave category. The difference of both outcomes will yield the balance.

Note that the employee leave year start date can be set as:

• Their start date i.e. one leave year start date for all leave categories.
• A specified leave year start date other than the employee’s start date i.e. one leave year start date for all leave categories.
• Leave category specific leave year start dates i.e. several leave year start dates each specific to one single leave category.

As the employee’s leave year start date is the starting point for the system to sum leave accrued and taken, it is crucial to take note of the employee’s leave year start date(s) in the employee’s leave allowances when reconciling pay slip leave balances with the employee’s leave history.