How to setup leave processing

Overview

All of Kwik-Pay's leave processing is linked to pay items added to the pay calculation screen for each employee. There is no separate leave accrual process.

There are pre-defined pay items which accrue leave entitlements for an employee, and others which record the leave taken. The leave accrual pay items calculate a number of units of leave entitlement which is added to the employee's leave balance. The leave accrual pay items do not normally calculate a cash amount.

The leave taken pay items calculate a number of units of leave taken based on the start and end dates of the leave spell entered in the pay calculation screen, and they can also calculate an amount of cash to pay to the employee.

Like all of Kwik-Pay's pay items, the number of units and cash can be over-ridden manually in the pay calculation screen. The amounts that Kwik-Pay calculates can be customised by setting the pay item's calculation method and factor in the pay item setup screen.

Review Kwik-Pay's leave pay items

Before entering any leave data, have a look at the set up of each of Kwik-Pay's leave pay items in the pay item setup screen. Select each of these pay items, and check the calculation method and factor:

Accrual annual leave
Annual leave
Accrue sick leave
Sick leave

If you have salaried staff, you may wish to change the 'Annual leave' pay item so that the calculation method causes a zero amount of cash to be calculated. You can do that by changing the calculation method to 'Rate' and factor to 0 (zero). In that way, you would not have to reduce that salary amount by the value of the 'Annual leave' pay item.

The standard leave accrual payment have a calculation type of 'Hol Accrue'. This calculation type either calculates the number of units of leave to accrue by dividing the annual leave entitlement by the number of pay periods or calculate the number of units of leave to accrue by multiplying the total of ordinary hours (the units of all pay items that have the 'hours type' property set to 'ordinary') by the leave accrual pay item's factor. When you add a leave type to an employee to set their yearly entitlement, you can also select which leave accrual method to use.

Define award leave entitlements

If the leave entitlements for your employees are common to a number of employees, or they vary according to length of service, enter the leave entitlements in the award leave screen

This means that each employee would have to be assigned to an award, and a classification even if your employees are on individual contracts, but it does cut down the possibility of error when entering leave entitlements on each employee's leave screen.

Set up payee leave and leave balances

If you have defined award leave entitlements, you need to assign each employee to an award and classification in the payee pay details screen. If you have previous leave balances for employees, select the payee leave screen and add a leave record for each leave type for which the employee has an outstanding balance. If you have a balance for a leave type not pre-defined in Kwik-Pay, you can add the leave type in the leave types set up screen. When setting up employee leave balances, you need to select a 'leave basis' which indicates how the amount to be paid for annual leave is calculated:

Ordinary rate pays the annual leave at the employee's hourly rate 1. You need to set the accrued total to the employee's current leave balance.
Salary no cash amount is calculated for the leave, only the units decrease the annual leave balance. It is assumed that the employee receives a salary payment that will not vary when the employee is on leave. You need to set the accrued total to the employee's current leave balance.

Payee leave balances (New Zealand)

When setting up employee leave balances in the New Zealand version, you get the option of selecting a 'leave basis' which indicates how the amount to be paid for annual leave is calculated:

Ordinary rate pays the annual leave at the employee's hourly rate 1. You need to set the accrued total to the employee's current leave balance.
Average Hourly Rate (Holidays Act 1981) calculates an hourly rate based on the earnings in the leave year in which the leave being taken was accrued, but if that rate is less than the employee's current hourly rate 1, the current hourly rate 1 is used instead. To calculate the average hourly rate correctly you would need to enter the earnings in each of the leave years for which the employee has a remainnig balance, and the number of weeks worked in that year.
Average Hourly Rate (Holidays Act 2003) calculates an hourly rate based on the earnings in the 12 months prior to the leave being paid, but if that rate is less than the employee's current hourly rate 1, the current hourly rate 1 is used instead. To calculate the average hourly rate correctly you would need to enter the previous 12 months pays in Kwik-Pay. That is you would need to start Kwik-Pay with pay date at least 12 months ago, and re-enter all the pays since that date. Alternatively, you can calculate the amount manually, and enter the cash amount in the annual leave payment in the pay calculation form.
Salary no cash amount is calculated for the leave, only the units decrease the annual leave balance. It is assumed that the employee receives a salary payment that will not vary when the employee is on leave. You need to set the accrued total to the employee's current leave balance.
Percentage of Earnings calculates a total amount to pay by multiplying the earnings to date by the leave percentage rate (from the payee, leave details screen) and then subtracting the total of holiday paid to date. The employee always receives the total outstanding holiday pay. Note you can over-ride the cash amount manually, and the remaining holiday pay will be calculated the next time the employee takes leave. You need to set the earnings total to the gross earnings for the employee's current leave balance. i.e. if the current holiday pay balance is $500, the earnings would be $500 / 6 * 100 ($8333.33) when the leave rate is 6%.

Start accruing leave

Leave will be accrued automatically each pay period if you select the leave accrual basis when setting up the employee's leave types. Note that if you do not select a leave accrual basis, then no leave accrual will take place until the end of the leave year for the employee's. If the leave accrual total for an employee is zero at the end of their leave year, the yearly entitlement of the leave will be added to their balance for that leave type.