In accordance with the Holidays Act 2003, an employee taking time off work for daily based leave types (such as alternative holiday, sick, domestic violence and bereavement leave) must be paid
at relevant daily pay (RDP) or average daily pay (ADP) if the day falls on an otherwise working day for the employee.
This article will explain the rate at which daily pay is determined when an employee takes this leave type and how it is processed in the pay run.
Firstly, ensure that the employee's leave pay rates have been configured correctly, as this will be the calculation method which will be applied within the pay run for all daily based leave taken for the employee. For more details on the leave pay rates setting, refer to the article here.
In the pay run, when a daily based leave type is processed, the equivalent earnings line will show a "i" icon, to the right of the pay rate:
Clicking on this icon will display a context panel which will show both the RDP and ADP calculations for the employee's daily based leave.
The RDP/ADP calculation method selected within the employee's leave pay rates section will show in bold text and this will be the default pay rate applied for that leave type within the pay run for the employee.
The RDP/ADP calculation method not selected within the employee's leave pay rates section will also display, however in grey text. The reason being for this is should the employee's work pattern change during the pay run period, you can override the equivalent earnings line pay rate with the ADP rate if required.
Relevant daily pay (RDP)
RDP means the amount of pay that the employee, employed on a regular working pattern, would have received had the employee worked on the day. The RDP rate is the employee's normal hourly pay rate as this is usually the amount the employee would expect to receive.
An employment agreement may also specify a special rate of relevant daily pay. This can only be used if
the rate is equal to, or greater than the actual relevant daily pay. If this is the case, then you can apply the special RDP rate by overriding the equivalent daily based leave earnings line pay rate within the pay run.
Average daily pay (ADP)
ADP is a daily average of the employee’s gross earnings over the past 52 weeks. This means the employee’s gross earnings are divided by the number of whole or part days the employee worked including any paid leave or holiday during that period.
Annual Earnings: This amount is derived from the employee's eligible gross earnings* processed in the pay runs within this payroll system, up to a maximum of 52 weeks. In this example, the first pay run processed in the payroll system commenced from 18/3/19
* Eligible gross earnings means any earnings paid to the employee using:
- pay categories where the "Exclude From Average Earnings" settings is NOT ticked; or
- system based pay categories that are NOT excluded from average earnings.
To learn more about pay categories settings, click here.
Payroll History: This amount is derived from the historic gross earnings imported for the employee. For each weekly, fortnightly or monthly pay run processed in the payroll system, the payroll history calculation will adjust to account for the 'remaining' weeks - to make up the 52 weeks. In this example, the payroll history only accounts for 26 weeks of historic gross earnings because the payroll system now has 26 weeks of current earnings data.
The instances where this field will display as $0 are as follows:
- no historic earnings data has been imported for the employee; or
- the employee has at least 52 weeks of pay run data processed in the payroll system; or
- the employee's first pay run was processed in this payroll system and so historic earnings data are not applicable in this scenario.
Total Days Worked: This is the total number of days (whole or part days) the employee has worked, including any paid leave and holidays taken during the period.
Calculation: This is the sum of both the annual earnings and payroll history gross earnings. The divisor here will always be the number of days worked.
Average Daily Earnings: The average daily amount is determined from the Calculation step above and is then divided by the employee's standard daily hours, as stated in the employee's Pay Run Defaults screen. In this example, the employee works a standard 8 hour day. If the employee's standard hours per day are set at '0', then the general formula used to determine the employee's standard daily hours is the value set in the "Standard Hours Per Day" field in the Business Details screen.
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