Overview
With this method, you can create a separate leave category for the specific purpose of managing Annual Leave in advance. You can use the employee’s Holiday Pay balance to limit what you allow them to take.
This leave category can be used if:
- an employee has exhausted their Annual Leave entitlement balance and wants to take Annual Leave In Advance; or,
- an employee has not yet reached 12 months of continuous service and wishes to take Annual Leave in advance of their entitlement.
The leave balance will accrue by converting the employee’s Holiday Pay dollar entitlement into a number of hours using their average pay rate across the period. This allows you to work out a reasonable estimate of what their Annual Leave would be.
If you use this approach, you will need to configure your standard Annual Leave category to offset from the new leave category. This will automatically reduce the amount of Annual Leave by the amount that they have already taken when an entitlement is accrued.
To use this method, you would assign the employee three leave categories and configure the Offset Leave Category in their Annual Leave (Accrued).
| Leave Category | Accrual Method | Additional Actions |
|---|---|---|
| Holiday Pay | % of Gross Earnings | |
| Annual Leave (Accrued) | NZ Annual Lump Sum |
Clears Holiday Pay on accrual Offset from Annual Leave in Advance |
| Annual Leave in Advance | Percentage of Gross Earnings Conversion | Converts from Holiday Pay |
Create an Annual Leave in Advance Category
To create a leave category for Annual Leave In Advance:
-
Go to Config > Leave > Add New Leave Category > select a region, if prompted > Create new Leave Category.
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Enter a Leave Category Name and Common Name if this is different.
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Tick the Enabled checkbox to make the leave category available to assign to employees.
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Set the Accrual Method to ‘Percent of Gross Earnings Conversion’. Choosing this method will add the options at the bottom of the screen to select which pay and leave items should be included in the accrual calculation.
- Set the Entitlement Type. If you are accruing Annual Leave in Advance in days, you will need to ensure that 'Days' is selected in the dropdown list.
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Select your Holiday Pay category (or equivalent) in the ‘Convert Leave Category’ drop-down. The leave category that you choose here is used in the conversion calculation for Annual Leave in Advance.
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Select the relevant Negative Threshold so that employees can request leave in advance.
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Enter the remaining settings for the leave category.
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Click Save.
To accrue annual leave in advance in days, you will need to ensure that you have set the Entitlement Type as ‘Days’.
Convert Holiday Pay to Annual Leave in Advance
When a pay run moves into Paid status, the system will convert any Holiday Pay accrual to a number of hourly units. This is calculated as Holiday Pay (in dollars) divided by the average hourly rate.
The average hourly rate is the number of hours worked in a period of Holiday Pay accrual divided by the total.
| Period | Hours Worked (Period Worked) | Holiday Pay Liable Gross Earnings (Period Worked) | Hours Worked (LYTD) | Holiday Pay Liable Gross Earnings (LYTD) | Holiday Pay Accrued 8%(LYTD) |
|---|---|---|---|---|---|
| Week 1 | 40 | $400 | 40 | $400 | $32.00 |
| Week 2 | 30 | $350 | 70 | $750 | $60.00 |
| Week 3 | 23 | $230 | 93 | $980 | $78.40 |
| Week 4 | 50 | $625 | 143 | $1605 | $128.40 |
| Week 5 | 10 | $115 | 153 | $1720 | $137.60 |
| Period | Average Hourly Rate | Percent of Gross Earnings Conversion |
|---|---|---|
| Calculated as Holiday Pay Liable Gross Earnings (LYTD) / Hours Worked (LYTD) | Calculated as Holiday Pay Accrued 8% (LYTD) / Average Hourly Rate | |
| Week 1 | $10.00 | 3.2 |
| Week 2 | $10.71 | 5.6 |
| Week 3 | $10.53 | 7.44 |
| Week 4 | $11.22 | 11.44 |
| Week 5 | $11.24 | 12.24 |
The updated Percent of Gross Earnings Conversion value will be stored in the system once a pay run is marked as Paid.
When an employee is applying for this leave, they will need to submit their request using the leave category you have created for ‘Annual Leave in Advance’.
Set an Offset Leave Category
If you’re using a separate leave category for Annual Leave in Advance, you will need to configure your standard Annual Leave (Accrued) category with an Offset Leave Category.
The Offset Leave Category setting is a drop-down list that will offset the balance of the selected leave category (in this case, your Annual Leave in Advance category) against the Annual Leave accrual when an employee reaches their next entitlement anniversary.
For example, an employee meets their 12 months continuous service and:
- their four weeks entitlement is 160 hours;
- they have accrued $12800 in Holiday Pay; and
- they have taken 10 hours of ‘Annual Leave in Advance’.
Prior to the entitlement applying, the balances will look like this:
| Leave Category | Value in Dollars | Hours |
|---|---|---|
| Holiday Pay | $12800 | |
| Annual Leave in Advance | $800 | -10 hours |
| Annual Leave entitlement | 0 |
Once the entitlement lump sum is applied, the balances will look like this:
| Leave Category | Value in Dollars | Hours |
|---|---|---|
| Holiday Pay | $0 | Converted to 160 hours (Annual Leave) |
| Annual Leave in Advance | $0 | -10 hours taken |
| Annual Leave entitlement | 150 hours |
The dropdown list will only display leave categories that match the Entitlement Type and Rate Calculation Method that match the leave category you are configuring.
For example, if you are offsetting your Annual Leave (Accrued) category and this is configured with a Rate Calculation Method of Dynamic Rate and an Entitlement Type of Days, the Offset Leave Type dropdown will only include leave categories that also have these settings.
The Entitlement Type and Rate Calculation Method for your Annual Leave in Advance item should match the settings for your Annual Leave (Accrued) item, so that both leave categories calculate a day or hour rate in the same way.
The Accrual Method for the leave category being offset (eg Annual Leave in Advance) must also be Percentage of Gross Earnings Conversion.
Annual Leave in Advance on a Pay Advice
When Annual Leave in Advance is processed in a pay run, the Leave Balances section will update to show a negative dollar value in the Balances column. The Taken column will show the number of leave units that have been taken.
Record Annual Leave in Advance
As this leave category is not accrued (ie it is a conversion of the Holiday Pay accrual), the Leave History Report won’t show an accrual.
When leave is taken using your Annual Leave in Advance category, it will show in the Leave History Report as Taken Units, with a description ‘Created a debit (spending of leave) for dd.mm.yyyy…’
When Annual Leave entitlement is applied, the full accrual amount should be applied (ie the value before the offset).
If a user were to run the Leave History Report for the 12 month period, the Annual Leave entitlement minus the Annual Leave in Advance total should equal the employee’s Annual Leave balance.
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