If an employee takes a continuous period of annual holidays without pay that goes over one week, not including daily base pay, then either you will move their anniversary date for leave entitlements out by the amount of unpaid leave taken or the employer can agree with the employee that their anniversary date for annual holidays entitlement will not change.
If they agree to this, the employer must also reduce the divisor for calculating average weekly earnings for annual holidays by the number of weeks or part weeks greater than one week that the employee was on leave without pay.
Glossary
- Leave without pay platform default categories.
- Employee settings.
- Pay run / Annual holidays calculations.
- Leave calculations context panel.
- Reports.
- Annual close out period rules.
Leave without pay platform default categories
There are two platform default leave categories we have made to cater to employees taking leave without pay and they are:
- Leave without pay, annual holidays.
- Leave without pay, excluding annual holidays.
These leave categories also flow through to the relevant linked leave allowance templates and work types.
Helpful Hint
These leave categories will appear in leave allowance templates; however we have set them to disabled. Existing businesses, i.e. those businesses created before 1/9/2021, will need to check their settings. You will need to make applicable changes such as disabling the old Leave Without Pay leave category and enabling the new Leave Without Pay leave categories.
The platform default settings for leave-without-pay, annual holidays are:
- Leave balance: Not tracked.
- Unit type: Weeks.
- Payment setup: Do not pay.
The platform default settings for leave without pay, excluding annual holidays, are:
- Leave balance: Not tracked.
- Unit type: Hours.
- Payment setup: Do not pay for the leave taken.
Employee Settings
Within the Leave Allowance page within the Employee File module, there is a field called Unpaid Annual holidays. The default setting for this is Move anniversary Date, and the default date is the employee's start date.
Hower, this may not suit your business setup, so we give you the option to change this default setting, with the two options being:
- Move anniversary date: The platform will automatically calculate the employee’s annual holidays entitlement/anniversary date out by the number of weeks or part weeks greater than one week that the employee was on leave without pay, annual holidays.
- Reduce AWE divisor: The platform will automatically calculate and reduce the AWE divisor by the number of weeks or part weeks greater than one week that the employee was on 'Leave without pay - annual holidays'
Helpful Hint
If you select the unpaid annual holidays option at the employee level, this will override the unpaid annual holiday selection at the business level for that employee.
Pay run / Annual Holidays Calculations
In the next relevant pay run where the employee takes annual holidays, the platform will automatically calculate and reduce the AWE divisor by the number of weeks, or part weeks greater than one week that the employee was on 'Leave without pay - annual holidays.
Helpful Hint
This reduced divisor calculation applies for that relevant anniversary leave year. Once the employee reaches their next anniversary date, then the normal AWE of 52 weeks calculation will apply.
The platform will automatically calculate the employee’s annual holiday entitlement/anniversary date out by the number of weeks or part weeks greater than one week that the employee was on 'Leave without pay - annual holidays'.
Leave Calculations Context Panel
Within the Employee Pay Details section within the Pay Run module, you can access the Leave Balances Overview feature to view the leave calculations. This page will detail the following Reduced Divisor information:
- Unpaid annual holidays taken: The number of weeks taken as leave without pay, annual holidays. Clicking on the number of weeks will take the user to the employee's leave balance screen. If you click on the Leave without pay, annual holidays' leave category, it will list out when they took this leave type.
- AWE divisor adjustment: The number of weeks used to reduce the AWE divisor. This reduced divisor calculation applies for that relevant anniversary leave year. Once the employee reaches their next anniversary date, then the normal AWE of 52 weeks calculation will apply.
- Reduced AWE divisor used: This is the reduced divisor used for calculating average weekly earnings for annual holidays. The platform reduces the divisor by the number of weeks or part-weeks greater than one week that the employee was on leave without pay.
Helpful Hint
If you select the unpaid annual holidays option at the employee level, this will override the unpaid annual holiday selection at the business level for that employee.
Reports
There are two payroll reports that will change based on whether you select the Move Anniversary Date option or the Reduce AWE Divisor option. These two reports are:
When the setting selected was Move Anniversary Date, then the:
- Four weeks' annual holiday entitlement will kick in on the new anniversary date.
- Annual holidays leave value will continue using the normal, greater of AWE/OWP calculation as it currently does.
When the setting selected was Reduce AWE Divisor, then the:
- Annual holiday entitlement of four weeks will start from the employee’s original anniversary date/start date;
- Annual holidays leave value will use the reduced AWE divisor calculation for the AWE component to determine the greater of AWE/OWP calculation.
When the setting selected was Move Anniversary Date, then the:
- Annual holiday entitlement of four weeks will start from the new anniversary date;
- Annual holidays leave value will continue using the normal, greater of AWE/OWP calculation as it currently does.
When the setting selected was Reduce AWE Divisor, then the:
- Annual holiday entitlement of four weeks will start from the employee’s original anniversary date/start date;
- Annual holidays leave value will use the reduced AWE divisor calculation for the AWE component to determine the greater of AWE/OWP calculation.
Annual close out period rule
You can also use the Move Anniversary Date feature to cater for employees whose work is subject to a regular annual close down, and who have not become entitled to annual holidays at the time of the close down.
You can nominate a date that the platform will treat as the date that the closedown starts. I.e., it will change the employee’s anniversary date for annual holiday entitlement regardless of their actual start date of employment or the actual date of the start of the close down. The new/moved annual holidays entitlement of four weeks will kick in from the new anniversary date and display the entitlement within the employee leave balance.
Helpful Hint
If you select the unpaid annual holidays option at the employee level, this will override the unpaid annual holiday selection at the business level for that employee.