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Employees love having the privilege of taking paid leave (almost as much as having a day off on a public holiday). Fair warning though about messing with an employee’s leave balance or incorrectly setting up their leave accruals – that’s definitely not on! KeyPay’s existing leave automation functionality makes managing employees’ leave a breeze. Furthermore, our new enhancements with configuring leave accruals truly make this aspect of employment a ‘set and forget’ activity.

So, what are these new enhancements you ask? They are:

  1. Setting a leave category to accrue based on the employee’s leave year;
  2. Capping the number of leave hours accrued;
  3. Specifying a maximum amount of leave hours to carry over to the next leave year; and
  4. Ability to accrue leave in advance.

These new settings can be configured via Payroll Settings > Leave Categories.

Accruing leave based on the employee’s leave year

Previously, leave was always set to accrue on an ongoing basis. This option still exists, however we have also added the ability to accrue based on a leave year. If this setting is chosen, the employee’s leave year start date will default to their commencement date. You can change this default however to a specific date instead:

Additionally, you can override the specific date on per employee basis via the employee’s Leave Allowances screen:

Whatever date is set here will only apply to leave categories that are set to accrue based on a leave year. To clarify, this date has no effect on leave categories set to accrue on an ongoing basis.

Capping the number of leave hours accrued

There could be several reasons why a business needs to cap the number of leave hours accrued:

(a) Overtime hours are not set up correctly and so, when worked, employees still accrue leave on those hours therefore exceeding the annual entitlement;

(b) An Enterprise Agreement contains a special leave entitlement but limits the number of hours that can accrue in a year;

and so forth..

There are 2 scenarios of how this setting can be applied:

(a) Where leave is set to accrue on an ongoing basis:

In this scenario, when an employee’s total leave balance reaches 20 hours, ongoing leave accruals will cease. When the employee takes leave and their balance drops below 20 hours, leave will start accruing again up until the balance reaches 20 hours.

(b) Where leave is set to accrue based on the employee’s leave year:

In this scenario, when an employee’s total leave balance reaches 20 hours for the leave year, ongoing leave accruals during that leave year will cease. Upon commencement of the next leave year, the employee will be allowed to accrue a further maximum 20 hours. The accrual will recommence in the pay run dated AFTER the employee’s leave year.

With this setup, regardless of how much leave an employee takes during a leave year, the amount accrued will never exceed 20 hours per leave year.

Carrying over a maximum number of leave hours

Users will have the option to limit the number of leave hours to be carried over to the next leave year when:

  1. a leave category is set to automatically accrue based on an employee’s leave year; and
  2. limits the number of leave hours accrued.

In this scenario, when an employee’s total leave balance reaches 20 hours for the leave year, ongoing leave accruals during the leave year will cease. Upon commencement of the next leave year, the employee will be allowed to accrue a further maximum 20 hours. The accrual will recommence in the pay run dated AFTER the employee’s leave year.

In addition, only a maximum of 10 hours leave (accrued from the previous leave year) will be carried over. If the employee had a balance of less than 10 hours from the previous leave year, their entire balance will be carried over.

Accruing leave in advance

This setting is significantly beneficial to businesses providing leave where the entitlement is added to the employee’s leave balance in advance on the first day of each leave year. For example, a business provides Study Leave to it’s employees. The entitlement comprises of 22.8 hours per year and is added to the employee’s leave balance at the start of each year. If the employee does not take the leave within their leave year, the balance does not carry over to the next leave year.

This scenario should be configured as follows:

  

How will payroll and employees know when the leave cap has been reached?

An employee’s pay slip will display when (a) leave accruals are now capped and (b) leave has accrued in advance. This will ensure there is no misunderstanding or concern as to why there are no ongoing leave accruals in the next and subsequent pay runs until the new leave year.   

N.B. The above comments will display if the business’s pay slip setting of “Show line notes” is activated.

From a payroll perspective, a warning will appear in the pay run to highlight when an employee has reached their leave cap:

These new enhancements are available now to all subscribers!

If you have any feedback, you can leave us a comment below or drop us a line via support@yourpayroll.com.au.

Improved transparency of PAYG calculations in a termination pay