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Most employees are entitled to a certain number of days of leave that they can take during the year. This might include annual leave, personal leave (sick leave), bereavement or compassionate leave, or carer's leave. Regardless of the name, AccountRight handles all leave in a similar way.
If you're not sure what leave your employees are entitled to, the Fair Work website is a good place to start.
How leave works in AccountRight
AccountRight uses entitlement categories to track the hours of leave an employee accumulates. The payment of leave is handled using a wage category. So when an employee takes leave, the wage category looks after the payment and the entitlement category keeps track of their leave balance.
Here's an example pay with leave:
In the above example, an employee has taken 7.6 hours of annual leave in the pay period, and this is entered against the Annual Leave Pay wage category. The Holiday Leave Accrual entitlement category shows the number of hours the employee has accumulated over the pay period (2.923 hours). You can also view an employee's entitlement balances at any time.
New to payroll or need a refresher? Take a look at this quick overview about managing leave:
AccountRight comes with some default categories for annual leave and personal leave which you can modify to suit your needs. Or you can create new categories from scratch.
Need to fix something? See Adjusting leave entitlements.
To set up a wage category for paying leave
Wage categories are used to include payments on an employee's pay. For each type of paid leave you have in your business, you'll need a wage category.
- Go to the Payroll command centre and click Payroll Categories.
- Click the Wages tab.
If a wage category already exists for the type of leave you're setting up, click the zoom arrow to open it. Otherwise, click New and give the category a name.
- For the Type of Wages, select Hourly (you can use this for both hourly-based and salaried employees).
- Choose the applicable ATO reporting category. If unsure, check with your accounting advisor or the ATO. Learn more about assigning ATO reporting categories for Single Touch Payroll reporting.
- For the Pay Rate, select Regular Rate Multiplied by and leave the next field set to 1.0000.
- If you've set up a separate account to track these leave payments, select the Optional Account option and choose the Override Account.
- Select the option Automatically Adjust Base Hourly or Base Salary Details. This ensures that when you pay an employee for leave, their regular pay hours and amounts are adjusted accordingly—so they're not overpaid.
- Click OK.
To set up an entitlement category
Entitlement categories are used to track the leave an employee has accrued. For each type of leave that accrues in your business, you'll need an entitlement category.
- Go to the Payroll command centre and click Payroll Categories.
- Click the Entitlements tab.
- If the entitlement you want to set up already exists, click the zoom arrow to open it. Otherwise, click New and give the entitlement a name.
In the Entitlement Information section
Set up how you want to calculate the accrual of entitlement hours. You have three options:
Option Description User - Entered Amount per Pay Period Select this option if you want to enter the hours to accrue in each employee’s standard pay, or manually enter hours accrued when recording the pays. Equals [x] Percent of
Select this option if your employees are paid on an hourly basis or work variable hours.
You'll need to specify a percentage rate, which will be multiplied by the hours worked in the pay period, to determine the number of entitlement hours accrued.
Select the category to base the calculation on from the Percent of selection list. We suggest you select the Gross Hours option and then click Exempt to choose the categories you don’t want the entitlement to accrue on.
For example, say your employees work a 38 hour week, and occasionally work overtime. You need to exempt any categories that are paid in addition to the employee’s standard 38 hour working week, such as overtime hours, holiday leave loading. But don’t exempt categories that are paid instead of their normal hours, such as annual leave or personal leave, otherwise the accrual will not calculate correctly.
The National Employment Standards specify that as a minimum, full-time and part-time employees get 4 weeks of annual leave, based on their ordinary hours of work. Also, the minimum personal leave entitlement is 10 days per year for full-time employees, or pro rata of 10 days for part-time employees, depending on their hours of work.
If your employees are entitled to... use this percentage... 4 weeks annual leave per year (or pro-rata for part-time employees) 7.6923% 10 days personal leave per year (or pro-rata for part-time employees) 3.8462%
If your employee entitlements are different to these, see Calculating an entitlement percentage.
Have more questions about minimum leave entitlements? See the Fair Work website.
Equals [x] Hours per
Select this option if your employees are paid a salary.
To calculate the correct number of entitlement hours, you need to specify a fixed rate that should be accrued each Pay Period, Month or Year, regardless of the hours worked by the employee. No matter which option you choose, the total hours accrued per year will be the same, so choose the calculation that’s easiest for you to work out.
Say your employees are entitled to 4 weeks annual leave per year, and they work a 7.6-hour day (38-hour week). You would enter:
- 152 hours per year (4 weeks x 38 hours) or
- 12.67 hours per month (152 hours / 12 months) or
- the rate per pay period, which you calculate by dividing the entitlement hours by the number of pay periods. For example, if your employees are paid fortnightly, you would enter 5.846 per pay period (152 hours / 26 pay periods).
- (Optional) To show accrued leave on pay slips, select the option Print on Pay Advice.
- (Optional) To carry over accrued leave into the next payroll year, select the option Carry Remaining Entitlement Over to Next Year. If you don't select this option, the leave balance will reset to zero at the start of the new payroll year.
In the Linked Wages Category section
- For the Linked Wages Category, select one or more wage categories.
Each entitlement category must be linked to at least one wage category. Select the categories that you’ll use to record the hours taken by employees for this entitlement (see above for setting up wage categories for leave payments). When recording a pay for an employee who has used their entitlement, for example, by taking a holiday, you allocate the hours taken using the linked wage category, and the employee’s accrued leave balance will be automatically reduced.
For example, when setting up a Personal Leave Accrual entitlement category, you could link the Personal Leave Pay and Personal Leave Pay (No Cert) wage categories (or whatever categories you've set up for this purpose). When an employee takes some personal leave, the Personal Leave Accrual balance is reduced by the hours you enter in those linked wage categories.
- Click Employee and select all employees who are entitled to this leave, and to whom the rate or percentage you've entered applies.
If you have:
- entered a percentage, only select employees who are paid hourly
- entered a fixed rate, only select salaried employees.
- chosen to enter a user-entered amount, select all the employees for whom you've specified entitlement hours in their standard pays.
What are Federal Hours?
Federal hours are the total of all hourly based wage categories assigned to an employee, except those wage categories which are exempt from PAYG Withholding.
If you're not sure whether to use Gross Hours or Federal Hours in your entitlement calculation, check with the ATO or your accounting advisor.
To record leave taken
- Start a new pay run (Payroll command centre > Process Payroll > Employee Pays step).
- Click the blue zoom arrow to review the employee's pay.
- Open the employee’s pay and enter the hours taken during the pay period in the Hours column of the wage category as a positive amount (if you use timesheets to track leave hours, the hours will be filled in for you).
- Click the blue zoom arrow next to the leave’s wage category to enter details about the leave. You can also enter the start and end date for the leave taken in the period (but if the employee took several non-consecutive days, just note down the details in the Notes field).
- Continue processing the pay as normal.
Paying leave in advance
If you’re processing a pay that includes an employee's standard pay, plus leave equal to additional pay periods, select the Pay leave in advance option in the Pay Period step of the Process Payroll Assistant. You can then select the number of standard pays you’re processing for the employee (0 or 1) plus the additional pay periods of leave.
To delete an entitlement category
You can only delete an entitlement category if it hasn't been used in an employee's pay.
- Go to the Lists menu and choose Payroll Categories.
- Click the Entitlement tab.
- Click the zoom arrow to open the entitlement category to be deleted.
- Go to the Edit menu and choose Delete Entitlement.
I have part-time employees as well. Do I need separate entitlement categories?
Not necessarily. If your part-time employees' entitlements are pro-rata of the full-time entitlements, the percentage used will be the same. This is illustrated in the example below.
Assume that your full-time employees work a 38-hour week and are entitled to 4 weeks (152 hours) of annual leave per year. You also have part-time employees who work a 19-hour week and are entitled to 4 weeks leave equal to 76 hours.
Percentage = (Total hours entitled to in a year / Total number of working hours in a year) x 100
For the full-time employees:
Total hours entitled to in a year = 152 (38 hours × 4 weeks)
Total number of working hours in a year = 1976 (38 hours × 52 weeks)
(152/1976) x 100 = 7.6923%
For part-time employees:
Total hours entitled to in a year = 76 (19 hours × 4 weeks)
Total number of working hours in a year = 988 (19 hours × 52 weeks)
(76/988) x 100 = 7.6923%
Learn more about Calculating an entitlement percentage
How do I get leave balances to reset at the start of the payroll year?
Deselect the Carry Remaining Entitlement Over to Next Year option in the Entitlement Information window.
What if some employees are paid hourly, and others are on a salary?
You’ll need to set up separate entitlement categories - one for hourly-based employees and another for salary based. For hourly employees, specify a percentage rate, and for the salary employees, specify a fixed rate per pay period, month or year.
Then click the Employee button in the Entitlement Information window to select the employees.
How do I record employee opening (carry over) balances?
If your employees already had entitlement hours owing to them when you started using AccountRight’s payroll features, enter the opening balances in their card.
Go to Card File command centre > Cards List, open an employee card > Payroll Details tab > Entitlements. Enter the opening balances (in hours) in the Carry Over column.
How do I show leave hours accrued in the pay period on pay slips?
Select the Print on Pay Advice option in the Entitlement Information window (Payroll > Payroll Categories > Entitlements tab > open the entitlement).
To include year-to-date amounts paid and entitlement balances (which includes any carry-over balances) on your employee pay slips, go to Setup > Preferences > Reports & Forms tab and select the option to Include all YTD amounts and Entitlement Balances on Paycheques Stubs.
Learn more about personalising pay slips.