How the Leave Unit Conversion is Calculated

This article will explain how the leave taken units from days or weeks to hours conversion is calculated on daily based leave (i.e. sick, annual leave) and any weekly based leave taken categories that may be configured.

From the employee's pay run default screen, the leave unit conversion calculations is based on the employee's basic or advanced standard working hours per week and hours per day settings. For more information refer to this article:

Within the the pay run, employee row, then to the 'Leave Taken' section, if you click over the 'i' icon (as shown below), the leave unit conversion panel will appear which will show you the leave units of days or weeks converted into hours:

Employee standard working hours a day/week

If using the employee's basic standard working per week, hours per day setting, the leave unit conversion will show as per example below.

Employee John Watson, works the standard business hours of 8 hours a day, 40 hours a week. In the example, when he takes leave, the following leave conversion will occur: 

Leave Information

• Dates - the dates which the leave is taken.
• Category - leave type e.g. annual holidays, sick leave, etc
• Unit Conversion - this will show the days/weeks taken converted into hours. The hours is based on the employee's standard working hours as indicated on the employee's pay run defaults  or defaulted to the business standard working hours. 

Leave estimate 

• Number of week days - the number of leave days taken. 
• Of those days, x are public holidays- if any of the leave days taken falls on a public holiday. 
• Assessing x days at x working days per week - for weekly based leave only, this will show the number of leave days required based on the employee's standard working days a week. 
• Leave estimate - the number of weeks or days of the leave taken. 

Calculation method

• Weeks or Days - If weekly based leave, the calculation determines the number of leave days taken divided by the days in work week. If daily based leave, the number of work days of leave taken. 
• Weekly hours or Daily hours - If weekly based leave, this is based on the standard weekly hours. If daily based leave, the employee's daily working hours. Standard weekly hours and the daily working hours are both defined in the employee's pay run default screen, otherwise the default used is the business standard hours. 
• Hours or Total Hours- If weekly based leave, the number of weeks taken multiplied by the employees standard weekly hours. If daily based leave, the number of days taken multiplied by the employee's standard working hours per day. Once again, standard weekly hours and the daily working hours are both defined in the employee's pay run default screen, otherwise the default used is the business standard hours. 

Employee advanced standard working hours a day/week

If you are using advanced standard hours for the employee, the leave estimate will show the break down based on the hours per day as defined in the employee's advanced standard hours setting. Using the example below - employee Justine Henin, works a 40 hour week, 10 hours per day Monday to Thursday, with every Friday off:

When she takes 5 days annual leave, the conversion is as follows:

Leave information

• Dates - the dates which the leave is taken.
• Category - leave type e.g. annual holidays, sick leave, etc
• Unit Conversion - this will show the days/weeks taken converted into hours. The hours is based on the employee's advanced standard working hours as indicated on the employee's pay run defaults.

Leave estimate & calculation

• x days are public holidays - if any of the leave days taken falls on a public holiday.
• Advanced standard hours - number of days of leave taken based on advanced standard working hours/days. 
• Leave estimate - the number of weeks or days of the leave taken. 

Paying out leave upon termination

Once you have chosen to terminate an employee from within the pay run, any leave that they are entitled to can be paid out by ticking the 'Pay out' checkbox as shown below:

NB: Any leave category that has the 'Exclude from termination pay out' checkbox ticked on the Payroll settings > Leave categories page will not have this checkbox displayed. 

What happens when an employee has received leave accrual in advance?

If an employee has received leave entitlements in advance, the system will calculate the actual 'accrued' equivalent and only pay what the employee would have accrued during employment. Any leave taken in advance will be deducted from earnings. There are a few scenarios which may occur, including:

• Employee has had upfront leave accruals applied AND employee takes annual leave from this 'upfront' balance: Upon termination, the advance leave is to be deducted from earnings.
• Employee has had upfront leave accruals applied AND employee has NOT taken any annual leave from this 'upfront' balance: Upon termination, the entitled accrued annual leave balance for the employee will be paid out to them. This includes the leave amount accrued up to the date of termination, not beyond. 
• Employee has had upfront leave accruals applied AND employee takes a portion of annual leave from this 'upfront' balance with some remaining accrued leave remaining: Upon termination, the entitled accrued annual leave balance for the employee will be paid out to them so long as the annual leave taken was leave already accrued. 

The below example shows an employee who is being terminated, and has taken more sick leave than they would have accrued at the termination:

You will see there is a negative earnings line for the repayment of the negative sick leave.

There are also two leave adjustment lines, the negative line is the balance of the leave that was accrued in advance minus the leave the employee would have been entitled to at termination. In this example, the employee received 14 days sick leave up front, they would have accrued 3.8 days at termination (14 - 3.8 = 10.2).

The second adjustment line is for the leave that is being repaid, 3.2 days. In this example, the employee took 7 days sick leave (of the 14 they were given up front), when they only had 3.8 days available (7 - 3.8 = 3.2 days to repay). This value is a positive to balance out the employees leave balance to zero.

Breaking down the accrual calculation

The system calculates the leave accrual as follows:

• Number of days that have passed between the employee anniversary date and termination date: e.g. a leave anniversary date of 10 May and a termination date of 3 September is 116 days. When calculated in proportion to a full year, it is 116 / 365 = 0.31780822.
• That value (0.31780822) is multiplied by the number of days leave that the employee received. For example, 6 days annual leave would calculate as 0.31780822 X 6 = 1.90684932. Therefore, this is the amount of days being accrued at termination.
• The system then does some rounding where that value is multiplied by 10, rounded up to the nearest number and then divided by 10 to get the actual accrued leave value. Using the above example this would give the result of 2 days annual leave accrued.
• If the employee hadn't taken any leave during the period, the 2 days annual leave will be paid out in the final pay run. However, if the employee had taken 3 days annual leave for example, they will need to repay 1 days annual leave in the final pay run, and the earnings will be reduced by that amount. As shown in the image above.
• Public holidays do not impact the leave pay out

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