This screen allows you to set up your leave categories and control such things as leave accruing automatically, how leave behaves in the pay run, whether or not to include the leave type in termination payments, if you want to apply negative balances on termination, whether leave should appear in your employee's pay slips and portal and the option to hide the leave category name from employee view.
The settings for Leave Categories can be accessed and updated by clicking on the "Payroll Settings" tab on the payroll dashboard > then "Leave Categories", located under the Pay Run Settings heading.
Default Leave Categories
The default set up for a new business includes 7 Leave Categories, as follows:
- Alternative Holiday Leave;
- Annual Holidays;
- Bereavement Leave;
- Domestic Violence Leave;
- Leave Without Pay;
- Parental Leave; and
- Sick Leave.
By default we have added the legislated minimum entitlements for the Annual Holidays, Sick Leave and Domestic Violence Leave categories which are the standard amounts.
We have setup the standard allowances in the default leave allowance templates based on the minimum entitlement, in the leave categories themselves. Please note that employees will have the entitlements apply by default unless you use a leave allowance template to remove the entitlements You can read more about this here.
We strongly recommend creating new leave categories if you plan on offering above the legislated minimum entitlements. You will find details on how to create a new leave category below.
If you require all employees and managers to add a note when submitting a leave request for themselves or, with regards to managers, on behalf of other employees tick the setting "Require notes when submitting leave requests".
Adding a Leave Category
You can choose to add more leave categories by clicking on the "Add" button to the right of the screen. You will then need to enter the following information:
- Name: This is required and should be named in a manner that makes it transparent to employees.
- External Id: This is only required if you are using an external system to capture leave requests or timesheet entries and hence need to map the code used from such external system. If an external id is used that has been used before you won't be able to save it if the 'unique external Id' setting is switched on. This setting is located on the Payroll settings > Advanced settings page. See here for more information.
- Employee Leave Balance: Select either 'Tracked' or 'Not tracked' from the dropdown list. For some types of leave that don't accrue in the usual way or don't have an entitlement (e.g. leave without pay) it might not make sense for an employee to have a 'balance'. In these cases you should set the value to 'Not tracked' to tell the system it doesn't need to keep track of how much of this type of leave has been taken by the employee.
- Automatically accrues: This setting will appear if Employee Leave balance = Tracked. Tick this checkbox if the leave is to accrue automatically. You will then be required to choose whether the leave will accrue on an ongoing basis or accrue based on a defined leave year. The leave year can be set as the employee's start date or another specific date. This date is specified via the employee's Leave Allowances page. Instructions on setting up leave allowances are detailed below.
- Leave entitlement to start after: This setting will appear if the Automatically Accrues = Based on the employee's leave year. You will then be required to enter the number of months e.g. 6 months, 12 months, for the leave to start accruing from which is based on the employee's start date or another specific date set via the employee's Leave Allowances page.
- Exclude from termination payout: This setting will appear if Employee Leave balance = Tracked. Tick this checkbox if the balance in this leave category is NOT to be paid out as part of the employee's termination payment.
- Apply negative balances on termination: You will be able to select this setting if 'Exclude the termination payout' is NOT selected. This setting allows any leave paid in advance (that results in a negative leave balance) to be reversed in the employee's termination pay. N.B. any new business created from 2 March 2020 will have this setting automatically ticked for the default Annual Holidays and Alternative Holiday Leave leave categories. If you do not want employees having to "pay back" their negative leave balances in their termination pay, ensure this setting is not ticked.
- Hide accruals from pay slips: This setting will appear if Employee Leave balance = Tracked. Tick this checkbox if you do not wish to allow employees to see the amount of leave accrued for this leave category within a pay run on their pay slips;
- Hide balances from pay slips and in employee portal: This setting will appear if Employee Leave balance = Tracked. Tick this checkbox if you do NOT wish to allow employees to see the balance of this leave category on their pay slips or in the employee portal;
- Hide leave category name from employee view: Tick this checkbox if you do not wish to have the leave category name displayed in the calendar contained within the employee's portal. All that will be displayed is the employee name and the period of leave taken. This setting works in conjunction with the setting "Employees can view approved leave" from the Employee Portal Settings screen. The section highlighted in the below image is an example of how approved leave is displayed in the employee portal when the leave category name is set as hidden:
Setting up Standard Allowances
When the leave category is set to automatically accrue, the legislated minimum entitlements will show by default (Annual Holidays, Sick Leave and Domestic Violence Leave categories only, any other leave categories will show a standard allowance of 0)
You can reference the below settings and the way they work if you need to make any changes to the standard allowance:
- Standard Weeks per year: this method accrues leave based on the number of hours entered in the employee's Pay Run Defaults page.
- N.B: If you have set the employee as working '0' standard hours per week, they will not accrue any leave in the pay run using this accrual method. Additionally and on a separate note, no leave will accrue unless the employee is being paid in the pay run.
- Standard Days per year: this method calculates leave based on the number of standard hours per day entered in the business' Standard Hours Per Day field (located in the Business Details or Employees file > Pay Run Defaults page).
- Hours per hour worked: this method will accrue leave on all hours processed in the pay run linked to pay categories that are set to 'accrue leave'. Take note that no leave will accrue unless the employee is being paid in the pay run;
- Hours per pay run: this method will accrue a fixed amount of leave per pay run, regardless of the number of hours worked and paid to the employee in that pay run. The employee will still accrue this leave in a pay run if they have not been paid anything, unless they are specifically excluded from the pay run.
Accruing leave on an ongoing basis vs based on the employee's leave year
By choosing to accrue leave on an ongoing basis, the employee will start accruing that leave from the first pay run. Whereas, if you choose to accrue leave based on the employee's leave year, you can determine when the leave will start to accrue.
For example, where an employee is entitled to 5 days of sick leave per year but the entitlement kicks in after 6 months of employment, you would choose to accrue the leave based on the employee's leave year. You would then set the employee's leave year start date, which is configured via the employee's Leave Allowances screen, as a specified date, being 6 months after the employee's start date. The result here is that the accrual will kick in from the first pay run after the pay run.
Please note that by default, an employee's leave year start date is set as their start date. If you do not want this to be the case, you must change this. This can be done:
- When adding the employee via the new employee wizard;
- Via the employee import; and/or
- From the employee's Leave Allowances page.
Capping leave accrual
Whether you choose to accrue leave on an ongoing basis or based on the employee leave year, you can set a maximum limit (ie cap) of leave hours that can accrue. To do this, click on "not limited" and select "limited to" from the dropdown list:
Then, enter the maximum number of hours that should accrue:
The capping behaviour is different depending on whether leave accrues on an ongoing basis or based on the employee leave year. When leave is set to accrue on an ongoing basis and the leave balance reaches it cap then leave will no longer continue to accrue. Only once the employee's balance drops below the cap of hours will leave start accruing again until the balance again reaches the cap.
When a cap is applied on leave that accrues based on the employee leave year, leave will no longer continue to accrue within the leave year when that cap is reached. Once the employee new leave year commences, leave will start to accrue again up to the maximum limit.
Additional settings for accruing leave based on the employee's leave year
When a leave category is set to accrue based on an employee's leave year, there are two additional settings that can be configured:
- Accrue in advance: Selecting this option means that the full annual entitlement will be accrued in the employee's first pay run and added to their leave balance. No additional leave will accrue within the employee's leave year and will only recommence upon the anniversary of the employee's leave year.
- Carry over the balance: If you have selected to limit the number of leave hours accrued for the leave year, an additional setting will appear that allows you to configure whether all or some of the employee's unused accrued hours should carry over to the next leave year. For eg, Domestic Violence Leave hours accrued in one year do not to carry over in the next year. As such, the setting would be configured as follows:
Payment Setup of Leave Categories
This determines whether the employee is paid for the leave taken and the pay category that is assigned when leave is taken. Our default payment setup settings for paid leave categories are set to report against a pay category - you are free to change this if necessary, to suit your business needs.
The four payment setup options are as follows:
- Basic: When an employee does not use timesheets, ie they are set to be paid a set amount of hours per week by default, the employee's leave balance will be reduced and earnings will not be impacted. When an employee is using timesheets to submit all time worked, an earnings line will be created and the leave balance will be reduced. To check the employee's timesheet setting, go to the employee's Pay Run Defaults page. The timesheets option is near the top of the page.
- Don't pay for the leave taken: When an employee does not use timesheets, ie they are set to be paid a set amount of hours per week by default, an earnings line with negative hours will be added to reduce the earnings for the employee. When an employee is using timesheets to submit all time worked, no earnings line will be created.
- Report the earnings for the leave taken against another pay category: When wanting to report payments for leave taken in a separate pay category (for reporting/journaling purposes), select this option. The earnings related to the leave taken will be assigned against the specified pay category instead of the employee's primary pay category. When this alternative is selected, the option will be given to use the rate of pay from the employee's primary pay category. Only tick this option if an employee is to be paid their base rate of pay when they take leave.
If an employee's leave is to be calculated based on average wage earnings or ordinary wage earnings, do not select this option.
- Custom: For advanced users only, this option allows the user to deduct hours from an arbitrary pay category and transfer them to another arbitrary pay category when leave is taken.
Editing an Existing Leave Category
To edit the settings of an existing leave category, simply click on the name of the leave category to expand the settings. Make the relevant changes and then click on "Save".
Any changes made to leave category settings will not be applied to existing employees. Updated settings will only apply automatically to any new employees who are subsequently added to your payroll. If you want to change the leave settings for your existing employees you will also need to make the same adjustments on each employee's Leave Allowances page. You can manage this better by using leave allowance templates, which is all explained here.
Termination Leave Category Settings
The leave category setting here will be what the system applies in the pay run when processing annual holidays or alternative holiday leave entitlements taken or paid upon termination.
The default applied is as per the system default set up for annual holidays and alternative holiday leave. If you create new leave categories relevant to annual holidays or alternative holiday leave which should be applied upon terminations, then you will need to adjust the termination leave category settings accordingly.
For examples on how to set up leave based on different scenarios, refer here.
Restoring a deleted leave category
You are able to restore a leave category by going to Payroll settings > Restore deleted items, and selecting 'leave category' from the drop down box. A list of all deleted leave categories will appear and you can click the 'Restore' option against the leave category that you are wanting to reinstate.
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