How does the System Behave when Taking Leave

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Taking leave is one of the core features of a payroll system. Unpaid leave aside, the usual expectation when applying 'leave taken' in a payroll system is that the employee is automatically paid for the leave taken.

This system is no different although there are a couple of different cases to consider when understanding how 'leave taken' will work.

1) Employees that work a standard number of hours (eg: full time/salary staff).

For this case, the employee should have a timesheet setting of Do not use timesheets or Use timesheets for exceptions only.

In this case, when they take leave, they're already being paid for it in the pay run so we just need to reduce the leave balance by the number of hours of leave that they take. This all happens automatically and you'll notice in later versions of KeyPay (now the default) that leave earnings are separated from ordinary earnings in the pay run.  We do this by adding two earnings lines when leave is taken - these lines simply remove the leave hours from the ordinary pay category and pay them against a Leave pay category.  NB. the net effect of these two earings lines is $0 so you must remember to include any leave hours with other hours worked in that pay period.  If there are no other hours worked in the pay period, you'll have to use the Add Earnings option from the Actions button within each employee record in the pay run and add an earnings line for the leave hours being taken.

2) Employees that use timesheets.

For this case, the employee should have a timesheet setting of Use timesheets to submit all time worked.

So, when timesheet employees take leave, we'll automatically create a corresponding earnings line to 'pay for' the leave. This happens automatically and the 'transfer' settings on the leave category can/should be left at 'When leave is taken': 'Take no further action'

The main case that is handled slightly differently is 'Leave without pay'. When this happens, we have a leave transfer rules that deducts that number of hours from the primary pay category. So for option 1 above, we'd add an earnings line with a negative number of hours. For option 2 above, we simply wouldn't add the corresponding earnings line.

Leave Transfer Rules

The main use of the leave transfer rules (apart from 'leave without pay') is for if you need to allocate the payments for leave taken to a separate account in your ledger. In that case, you'd create a separate pay category called 'Annual Leave' and configure the leave category as:

  • 'when leave is taken': 'transfer hours from a specified pay category'
  • 'deduct hours from': 'employee's primary pay category'
  • 'transfer hours to': "Annual Leave" pay category.

The important thing to note if leave transfer rules are configured is that the employees pay rates must be maintained on the Annual Leave pay category.

If you have any feedback or questions please contact us via support@yourpayroll.com.au 

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