You may pay some employees holiday pay at the rate of 8% of their gross earnings instead of providing them with four weeks of annual holidays each year. This option is called Pay-as-you-go (8%) and is available to workers on short-term contracts and those who work intermittently.
Important
The conditions under which you may apply the 8% rule include:
- The employee is employed on a genuine fixed-term agreement of less than 12 months, or
- The employee works so intermittently or irregularly that it is impractical for the employer to provide them with 4 weeks’ annual holidays, and
- The employee must also agree to it in their employment agreement.
What you need to do
There are simple steps you need to take in your personnel and pay run settings to make sure you apply the 8% setting correctly to their files. We have broken these down into three key steps that you need to follow to set up this process correctly on your payroll platform.
For New Employees
- Log into your payroll platform
- Add a new employee via the add employee wizard.
- Within step 3 - Employment Details, Employment type should be set to casual.
- Apply the Irregular Employment leave allowance template.
- Click Save.
For an employee already on the platform
For an employee already set up in the platform, follow these instructions:
- Log into the payroll platform.
- Navigate to the employee's profile.
- Select the Tax Code Declaration page, and change the Employment Type to Casual.
- Click Save.
- For those employees who are set up as a casual employee, please check their Pay rates screen and ensure the PAYG 8% is ticked and has 1 unit entered. This should happen automatically when the employee is set to casual as their Employment Type but can be easily added if for some reason it was not automatic.
- Click Save.
- Then from the employee's profile go to the Leave Allowances page and select the Casual Employment template from the leave allowances template drop-down.
- Click Save.
- "Pay as you go (8%)" pay rate will automatically kick in when 'Irregular Employment' leave allowance template AND Casual employment type is set for the employee.
Update the Leave Allowance template
Helpful Hint
When the leave allowance template is set to Irregular employment, we will not apply the standard leave category settings of annual holidays of four weeks; sick leave of ten days, and domestic violence leave of ten days. Instead, Pay-as-you-go (8%) will apply.
- Log into your payroll platform.
- Click the List submenu.
- Click on the employee who needs pay as-you-go 8% set up.
- Click the Leave Allowances button.
- Select the Irregular Employment template from the Leave Allowances drop-down list.
- Click the Save button.
View details in a pay run
Important
The employee's pay as-you-go (8%) will automatically show as an earnings line and we will calculate the 8% of the employee's gross pay. Pay as-you-go (8%) will display as a separate line item on the employee's pay slip.
- Log into your payroll platform.
- Click the Pay Run menu.
- Click on the required pay run.
- Click the employee that needs to have Pay-as-you-go 8% details viewed.
- In the pay run, the employee's pay as you go (8%) will be automatically included as an earnings line and will calculate the 8% of the employee's gross pay.
- Check to ensure the pay run is correct, and if so, then finalise pay run.
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The Pay-as-you-go (8%) will display as a separate line item on the employee's pay slip.
Helpful Hint
You will see the Pay as You Go 8% under the Earnings section within the employees pay slips details. You can click on the 'i' to the Pay as-you-go (8%) Rate input field to see how we calculate this figure.