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When using the Annual Leave method of holiday pay calculation, only full days owing are shown on payslips, rather than fractional days. Only full days are shown because the day calculation is an estimation, and showing fractional days would be too imprecise to be useful.

This article explains how this calculation works, and how you might use the information.

Leave entitlements

Employees are entitled to at least 4 weeks of annual leave per year (pro rata). This entitlement is received all at once at the end of 12 months of employment, and does not accrue incrementally.

In other words, no days of annual leave are due throughout the year, and then at least 4 weeks of leave become available at once.

If an employee leaves before the one year anniversary of their employment, they are paid out for the days they have accrued. This is paid in a lump sum at 8% of their gross income — the equivalent payment of any annual leave they would have accrued.

Leave in advance

If you and your employee both agree, you can allow your employee to take leave in advance.

It is wise to only allow your employees to take leave in advance that they would have accumulated if leave accumulated incrementally. For example, you might let a full time employee who has worked for 3 full months (a quarter of a year) take 1 week of paid leave (a quarter of their annual leave entitlement). If they end their employment immediately after taking leave, they have been paid for their accrued leave entitlement and no more.

Leave calculation

Ace Payroll calculates accruing annual leave for you by taking the 20 day entitlement, dividing it by 365, and estimating that your employee therefore accrues a little over 0.05 days of annual leave per day that they work. This figure is shown on the payslip as a guide — it does not mean your employees are legally entitled to these days. How this figure appears on the payslip depends on your settings.

How leave is shown on payslips

There are two options for showing leave on payslips: Show As Single Number and Entitlement + Estimate.

Show As Single Number shows any leave your employee is entitled to (leave they have accrued but not taken in the last full 12 month period), plus any leave they are estimated to have accrued (leave they are not legally entitled to until their next anniversary) as one single number.

For example, if your employee accrued 20 days of leave last year but didn’t take any of them, and has worked a further 3 months this year to accrue an estimated 5 days, their payslip will say they are owed 25 days of leave.

Entitlement + Estimate shows the leave your employee in entitled to (leave they have accrued but not taken in the last full 12 month period) as one number, and the leave they are estimated to have accrued (leave they are not legally entitled to until their next anniversary) as another, separate number.

For example, if your employee accrued 20 days last year and didn’t take any, and has worked a further 3 months this year to accrue an estimated 5 days, their payslip will say they are owed 20 ‘Full Year’ days of leave, and 5 ‘Current Year’ days of leave.

Extremely fine tuning

There is an option to show annual leave entitlements but remove accrued leave estimates from payslips and the leave report.

You might choose to do this if you don't allow employees to take leave in advance, and don't want to confuse them by showing an accrued leave estimate on their payslip.

 

To change the way days owing are shown on payslips
  1. From the front screen click Produce Payslips, then click Setup.

  2. Scroll down to the Data Options section to Holiday Pay.

  3. To stop leave entitlements from showing on payslips, leave Holiday Pay unticked.

  4. To change the way leave entitlements are shown, select Holiday Pay, and click either in total or itemised (whichever one is shown). The Holiday Days Owing On Payslips window opens.

  5. Select either Show As Single Number or Entitlement + Estimate, then click Go.

Remove accrued leave estimates from payslips and the leave owing report
  1. From the front screen move your mouse to the drop down menu at the very top of the screen and click Setup, then click Extremely Fine Tuning.

  2. Scroll down to As Per Act Don't Show Current Year and select it. Accrued leave will not show on the Leave Owing report.

  3. From the front screen click Produce Payslips, then click Setup.

  4. Scroll down to the Data Options section to Holiday Pay.

  5. Select Holiday Pay, then click either in total or itemised (whichever one is shown). The Holiday Days Owing On Payslips window opens.

  6. Select In Total, then click Go.

    Payslips will show only your employees' unused leave entitlements from their previous full year.