How does the System Behave when Taking Leave

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. Primarily, you need to consider whether the employee is paid default/a fixed pattern of hours or by timesheets as this will change the way the leave is taken in the pay run. 

Employees that work a fixed pattern of hours

These would be your traditional permanent staff that do not get paid by timesheets - rather they are paid the same earnings each pay run, regardless of hours worked. Typically, these employees' Pay Run Defaults are set up with standard hours to be paid by default in the pay run, and the employee's timesheet setting should be Do not use timesheets or Use timesheets for exceptions only.



Then, 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 amount of leave that they take. This all happens automatically and you'll notice in later versions of the system (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. The net effect of these two earnings lines is $0 so you must remember to include any leave hours with other hours worked in that pay period.


As an example, the below employee is paid a default 38 hours per week which will already be included in the pay run. As such, when the 38 hours of Annual Leave is paid, the hours worked are automatically deducted by the same amount. This ensures the employee is not paid for hours worked when they were actually on leave and their total hours don't exceed 38. If they were to take 10 hours leave, only 10 would be deducted from hours worked, and so on. 


 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.

Employees that use timesheets

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


When timesheet employees take leave, we'll automatically create a corresponding earnings line to pay for  the leave. No deduction line is created as it is not expected the employee would submit a timesheet for hours worked if on leave. The below example shows an employee who has submitted a timesheet for 8 hours worked and taken leave for 30 hours, totalling 38 hours paid. 



The main case that is handled slightly differently is 'Leave without pay'. When this happens, we have a leave transfer rule that deducts that number of hours from the primary pay category. In this scenario, we do not then add a corresponding earnings line.


Custom Setup (Leave Transfer) 

The main use of the leave transfer rules (apart from 'leave without pay') is for when 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 for that specific leave category, eg:

  1. Create a pay category called ''Annual Leave 2''
  2. Configure the leave category as a ''Custom'' payment setup
  3. Select ''Deduct hours from'' > ''Employee's primary pay category''
  4. Transfer hours to "Annual Leave 2" pay category.




The important thing to note if leave transfer rules are configured is that the employees' pay rates must be maintained on the pay category. If the employee is being paid their base rate for leave taken, simply select the "Use pay rate of Employee's primary pay category for transferred earnings line" checkbox and this will automatically apply the employee's primary pay rate in the pay run.


Leave Balances Context Panel


The employee's Leave Balances will automatically update with any leave taken or accrued in the pay run, and you can view this by selecting the employee's Leave Balances option. 


This context panel will display the total updated balance as of at that pay run, including any leave taken or accrued in the period. The below employee had 38 hours Annual Leave available when the pay run was created. 30 hours were paid in the pay run with 8 hours remaining on the balance, but the employee also accrued 2.92296.


As such, the total current balance for the employee is 10.92 hours (8 + 2.92296 = 10.92). The -27.08 is calculated by adding the accrued leave to the leave paid out (-30 = 2.92296 = -27.08), but the total 30 hours will still show as the leave taken in the pay run, pay slips and reports. 




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