ANSWER ID:33441

This support note explains how to setup your software to cater for unpaid leave (leave taken without pay).

A wage category needs to be created to show the hours the employee takes as unpaid. To do this:

1. Go to the Payroll command centre and click Payroll Categories. The Payroll Categories List window appears.
   
   
2. Click the Wages tab.
   
   
3. Click New. The Wages Information window appears.
   
   
4. Enter a name for the new wage category, for example "Unpaid Annual Leave" or "Unpaid Sick Leave" (as applicable).
   
   
5. For Type of Wages select Hourly (regardless of whether this is for hourly or salary employees).
   
   
6. Select the Fixed Hourly Rate of option and enter $0.00 as the amount. Here's our example:
   
   
7. Click Employee. The Linked Employees window appears.
   

8. Select the employees to whom this wage category applies. This will ensure the wage category will appear on the employee's payslip.
   

9. Click OK.
   

10. Click OK to the Wages Information window.
    

11. Click Close to the Payroll Category List window.

Excluding unpaid leave from accruing leave entitlements

Sometimes the employee will not accrue leave entitlements while taking unpaid leave. If this is the case for your business, the new wage category (created above) needs to be exempt from accruing leave.

If you're not sure if this is applicable in your circumstances, check with the relevant wage authortiy (such as fairwork.gov.au).

To exclude the unpaid leave from accruing leave entitlements:

1. Go to the Payroll command centre and click Payroll Categories. The Payroll Categories List window appears.
   
2. Click the Entitlements tab.
   
3. Click the zoom arrow next to the leave entitlement to be excluded during unpaid leave. The Entitlements Information window appears.
   
4. If the entitlement you have selected accrues by a percentage, click Exempt and select the new Unpaid Annual Leave wage category. As shown in our example below, we have selected the Unpaid Annual Leave wage category to be excluded from accruing annual leave.
   
   Note: If the entitlement you have selected accrues by a set number of hours per pay period/month/year, you will need to manually change the hours the employee accrues when processing their payroll.
   
5. Click OK then click Close.

The example below shows a paycheque with 20 hours of Unpaid Annual Leave. Note that any Base Hourly or Base Salary amounts that would normally appear in an employee's Standard Pay have been manually removed to avoid overpayment.