FAQ Leave Accruals

PayTek can be set up to track each employees annual leave entitlements using one of five methods. Each method calculates and updates the total entitlement when each payrun is finalised and reduces the entitlement by any hours leave paid to the employee against the leave pay item.

You must establish a pay item for annual leave for each method.

Method 1 – Accruing fixed hours per payrun.

This is the simplest and most common way to accrue leave.

In this example the employee commenced on 2-Jul-2003 so the opening balance is zero. The employee is entitled to 4 weeks leave per year and works a 38-hour week. The payroll is a weekly payroll and the annual leave pay item is AL. The employee will accrue 38 hours x 4 weeks / 52 weeks per year = 2.923 hours per week.

Method 2 – Accruing a percentage of the amount earnt as leave

Permanent part-time employees who work different hours per week usually accrue leave based on the amount they are paid.

In this example the employee has just commenced work and so has no opening balance. The employee is entitled to one twelfth of their earnings as leave.

Method 3 – Accruing a percentage of the hours worked as leave

Permanent part-time employees who work different hours per week may accrue leave based on the number of hours they work.

In this example the employee had worked last financial year and thus has an opening balance of 45 hours. The employee is entitled to one twelfth of their hours worked as leave (based on the specified pay items – see note).

Method 4 – Accruing leave on the anniversary date

You can accrue leave on the employees anniversary date. When you finalise a payrun for a period including the employees anniversary date, PayTek will accrue the full accrual amount for the employee.

Method 5 – Accruing leave manually

Sometimes it is useful to accrue leave manually. One example may be to track time off in lieu where you can deduct the hours one week then pay them back in a future week. The benefit of this is that any leave owing at year end will be carried forward into the next year.

NOTE

For method 2 or 3 you must specify which pay items are to be included in the percentage calculation. This is done by using a pay item group and ticking the relevant pay items to include them in the calculation. Typically ordinary time would be included but overtime may not be included.

I have monthly and weekly staff. How do I accrue the annual leave?

If your payroll as a weekly and monthly pay cycle you should establish the leave accruals for both weekly and monthly employees on the most frequent basis ie weekly.

This is because PayTek will accrue leave for each active employee each week (even if they are not paid in the payrun) to ensure the accruals are updated correctly even if an employee is paid in advance or is away on leave.

So the weekly payruns are used to update the leave accruals and when you pay the monthly employees you should be careful to tell PayTek NOT to accrue leave when you finalise the payrun.

An employee has taken leave without pay. How does this affect the leave accruals?

If the employee is accruing leave under method 2 or 3 it does not affect the leave accrual as they are only accruing leave for the hours worked or amount earnt.

If the employee is using method 1 and accruing fixed hours per week you will have to do an adjustment against the annual leave pay item to reflect the leave without pay.

In this example the employee is entitled to 4 weeks leave per year and works a 38-hour week. The payroll is a weekly payroll and the annual leave pay item is AL. The employee will accrue 38 hours x 4 weeks / 52 weeks per year = 2.923 hours per week. He takes 2 days off without pay in one week. This means he loses 2/5 of his accrual for the week so we have to reduce his annual leave entitlement by 2 / 5 x 2.923 = 1.169 hours.

The simplest way to enter the adjustment is shown below. If the employee takes extended leave without pay such as maternity leave you should edit their masterfile and tick the “Do not accrue leave” box. PayTek will then not add the accrual for this employee each payrun. You will be reminded of this when you finalise each payrun.

Because 1.169 hours annual leave is being “paid” to the employee the accrued total will be reduced by this amount.

My employees only accrue 5 days sick leave in the first year then 8 days from then on. How do I handle this?

Set up the sick leave accrual as you would annual leave using method 1 and base the weekly entitlement calculation on 5 days. When this employees anniversary is due you will be reminded in the payroll data entry window. On their anniversary payrun increase the accrual amount based on 8 days entitlement a year.

How do I accrue long service leave using PayTek?

It is recommended that you start accruing long service leave as soon as the employee is entitled to be paid it.

E.g. If the employee must work for 10 years before being able to take long service leave but is paid pro-rata if they resign after 7 then establish the accrual on the 7th anniversary as this is the start of the employers liability to pay it.

In our example the employee is eligible for 3 months LSL for each 10 years service, pro-rata after 7 years of service. He works 38 hours per week. On the 7th anniversary set up the accrual and calculate the opening balance thus: 3 / 12 x 52 weeks pa x 38 hours / 10 years = 49.4 hours x 7 years = 345.8 hours. The weekly accrual from then on is 49.4 hours pa / 52 payruns = 0.95 hours per week.

What is the purpose of suspending an employees pay in their masterfile?

If a person is paid in advance say, to go on annual leave you may suspend their pay until the week they return. This suspends the loading of their standard pay if they have one on file so they are not paid by mistake when all the standard pays are loaded.

What is the purpose of the “do not accrue leave” option in the employee masterfile?

If a person takes extended time off without pay such as maternity leave you may use this option to exclude them from the leave accruals when the payrun is finalised.

How do I adjust the leave accrual for an employee?

The easiest way to adjust the total is to enter the adjusting hours against the leave pay item in the employees pay with no dollar amount (see the adjustment for LWOP above).

Note that a NEGATIVE amount recorded against the leave item for an employee will INCREASE the accrued hours owed to the employee. If you do not want this adjustment to appear on the payslip you can do the adjustment as a separate payrun (Note: this will affect the YTD figures on the employee payslip of course which could cause confusion).

Disclaimer: This information is of a generic nature intended to assist in the use of the software. For specific advice regarding your particular circumstances please seek assistance from your Accountant, the Australian Taxation Office or your IT Consultant as appropriate.