The purpose of this article is to explain how the system will calculate annual holidays in relation to the following scenario: Employee is on parental leave; and the employee becomes entitled to annual holidays during parental leave, or within 12 months from when they return to work.
In a nutshell, only the average weekly earnings (AWE) rate is to apply, with NO comparison to the ordinary weekly pay (OWP) rate. This is explained in detail below.
NB: this only impacts annual holiday calculations. There are no changes to the existing calculations for daily based leave such as bereavement, alternative holiday, domestic, public holiday, sick leave.
This article covers the following topics:
- Parental leave categories
- How to process Parental leave within the pay run
- Annual holidays leave context panel - AWE calculation
- Termination context panel - Annual holidays
- Annual holidays parental leave & reports
Parental leave pay category
The new parental leave setting is how the system determines if parental leave rules need to be applied to annual holidays entitlements (which started during parental leave or within 12 months of returning to work from parental leave).
Provided that the 'Parental leave' setting within a pay category has been ticked, when annual holiday entitlement has been reached within a pay run, the system will apply the parental leave rules (ie only the average weekly earnings (AWE) rate is to apply, with NO comparison to the ordinary weekly pay (OWP) rate) where applicable. If you would prefer to add/rename your own pay category for parental leave purposes, you don't have to use the system default one, but the important thing to remember is that the "Parental leave" setting must be ticked.
How to process Parental leave within the pay run
Businesses created after 19 May 2021
When an employee is on parental leave, use the Parental leave pay category (with the Parental leave setting ticked) for the employee:
When an employee returns to work, change the primary pay category to the relevant pay category used by the employee. In this example, the employee's pay category was changed back to 'Salary':
NB: The annual holiday parental leave rules occurs once and will be applied on the block of annual holiday entitlement that kicks in first. To explain further, this refers to whether or not it applies during parental leave or within the 12 months of returning to work from parental leave.
Businesses created before 19 May 2021
The workaround for existing business who wish to apply the annual holidays parental leave rules to employees who are on parental leave or has been 12 months since returning to work from parental leave, means that they will need to:
- Update your existing parental leave related pay category by ticking the "Parental leave setting". Remember to click 'Save'.
- Unlock the relevant pay run/s where the existing parental leave related pay category was applied for employee/s.
- Go to 'Actions' button and 'Recalculate' the pay run/s for the employee.
- Then finalise the pay run.
NB: The above steps need to be completed for all pay runs where the existing parental leave related pay category was applied to the relevant employee/s. This will then retrospectively apply the parental leave rules to the relevant block of annual holidays entitlement. To check whether the parental leave rules have been applied to the relevant block of annual holidays entitlement, generate a leave balance report as at today's date. There should be a separate line item called "Annual Holidays (Parental leave rules apply)" leave type for the employee.
If you wish to create a new parental leave pay category for future use, you can do so, just ensure that the "Parental leave" setting is ticked for the annual holiday parental leave rules to apply.
Annual holidays leave context panel - AWE calculation
It's important here to be reminded that where the employee's anniversary date falls during parental leave or within 12 months since returning to work, the 4 weeks of annual holiday entitlement will be paid at average weekly earnings (AWE) rate only, with no comparison to the ordinary weekly pay (OWP) rate. Where the employee has both a 'normal' (ie parental leave rules not applying) block of unused annual holidays and 'parental leave' block of annual holidays then the 2 calculations will show within the pay run. The below example shows two sets of annual holidays taken: The first from the 'normal' block of unused annual holidays (in red); and the parental leave block of annual holidays (highlighted in yellow):
Starting with the annual leave taken relating to parental leave rules (yellow above), as you can see in the below context panel example, parental leave rules have applied to the annual holiday leave taken, and only the AWE calculation rate is selected/bolded in the context panel. Furthermore, this applied the rate selection within the pay run for the relevant annual holidays taken earnings line. This means the employee may get a reduced rate for leave that could be less than their normal rate of pay:
Termination context panelUpon termination of an employee, where the employee has annual holidays relating to parental leave, a separate line item 'Annual holidays payment - Parental leave' will display (as shown in the screenshot below). The amount here is calculated using the average weekly earnings rate:
Annual holidays parental leave & reports
The following is a list of all reports that will reflect 'Annual holidays parental leave':