Annual holidays parental leave rules

The purpose of this article is to explain how the platform 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.

Only the average weekly earnings (AWE) rate is to apply, with no comparison to the ordinary weekly pay (OWP) rate. Please keep in mind that it 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.

Parental leave categories

Businesses created after 19th May 2021

There is a new platform default pay category called Parental leave, and within this pay category, we have added a new Parental Leave setting. The new parental leave setting is how the platform determines if it needs to apply the parental leave rules ‌to annual holiday entitlements, which started during parental leave or within 12 months of returning to work from parental leave.

  1. Log into your payroll platform.
  2. Select Payroll settings.
  3. Navigate to Pay Categories
  4. Select the category you want to apply the setting to.
  5. Select the Parental Leave tick box.
  6. Click Save. parental leave.jpg

Businesses created before 19th May 2021

If you created your business before 19th May 2021, you can manually update your existing parental leave-related pay category.

  1. Log into your payroll platform.
  2. Select Payroll settings.
  3. Navigate to Pay Categories
  4. Locate your leave-related pay category.
  5. Select the Parental Leave Settings tick box.
  6. Click Save

Helpful Hint

If you have selected the Parental Leave Settings tick box within a pay category, when you reach the annual holiday entitlement, within a pay run, the platform will apply the parental leave rules. I.e, only the average weekly earnings (AWE) rate will 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 do not have to use the platform default one, but the important thing to remember is that you must select the Parental Leave Settings tick box.

How to process Parental leave within the pay run

Businesses created after 19th May 2021

When an employee is on parental leave, use the Parental leave pay category.

  1. Log into your payroll platform.
  2. Go to the Employee list.
  3. Navigate to the relevant employee.
  4. Select Default Pay Run Settings.
  5. Scroll down to Primary Pay category and select the one with the Parental leave setting ticked for the employee.
  6. Click Saveparental leave 2.jpg
  7. When an employee returns to work, change the primary pay category to the relevant pay category used by the employee.

The annual holiday parental leave rules occur once and we will apply a block of annual holiday entitlement that kicks in first. This refers to whether it applies during parental leave or within the 12 months of returning to work from parental leave.

Businesses created before 19th May 2021

There is a workaround for existing businesses who wish to apply the annual ‌parental leave rules to employees who are on parental leave or have been 12 months since returning to work from parental leave:

  1. Log into your payroll platform.
  2. Go to Payroll settings.
  3. Update your existing parental leave-related pay category by selecting the Parental Leave Settings tick box.
  4. Click Save.
  5. Navigate to Pay runs.
  6. Unlock the relevant pay run/s where the existing parental leave-related pay category was applied for the employees
  7. Click the Actions button.
  8. Click the Recalculate button. recalculate.jpg
  9. Finalise the pay run. finalise (1).jpg

Helpful Hint

You will need to complete the above steps for all pay runs where you applied the existing parental leave-related pay category to the relevant employees. It will then retrospectively apply the parental leave rules to the relevant block of annual holiday entitlement. 

To check whether the parental leave rules have been applied to the relevant block of annual holiday 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 make sure that the select the Parental Leave Settings tick box for the annual holiday parental leave rules to apply.

Annual holidays leave context panel - AWE calculation

Where the employee's anniversary date falls during parental leave or within 12 months of returning to work, we will pay the four weeks of annual holiday entitlement at average weekly earnings (AWE) rate only, with no comparison to the ordinary weekly pay (OWP) rate. 

Where the employee has both a normal i.e. parental leave rules not applying, block of unused annual holidays and parental leave block of annual holidays then the two calculations will show within the pay run. 

Starting with the annual leave taken under parental leave rules, we will apply the parental leave rules to the annual holiday leave taken, and we will only select the AWE calculation rate in the context panel. Furthermore, we will apply this to the rate selection within the pay run for the relevant annual holidays taken earnings line. It means the employee may get a reduced rate for leave that could be less than their normal rate of pay:

For the normal parental leave rules not applying to blocks of unused annual holidays we will show the existing comparison/greater of calculation AWE/OWP, with the greater amount as the rate selection, example below. We will deduct the annual holidays taken in the order of the oldest to newest annual holidays block of entitlement.

Employers may choose not to apply the AWE-only rule, and continue to pay their employees the normal greater of AWE/OWP rate. You can ‌do this manually by overriding the annual holiday leave-taken earnings line rate with the OWP rate.

Termination context panel - Annual holidays
Upon termination of an employee, where the employee has annual holidays about parental leave, a separate line item 'Annual holidays payment - Parental leave' will display. We will calculate the amount here using the average weekly earnings rate. If the employee does not have annual holidays for parental leave, then the Annual Holidays Payment - Parental Leave row will not show within the termination context panel.
Annual holidays, parental leave and reports

The following is a list of all reports that will reflect 'Annual holidays parental leave':

Leave balance report

  1. Log into your payroll platform.
  2. Select Reports.
  3. Click on Leave Balance report.
  4. Set your filters.
  5. Click Run Report.
  6. In the summary view for this report there is a separate line for the leave balance. Within the expanded view, annual holidays where the parental leave rules have applied will display as a separate line item, and this is based on AWE rate calculation only. liability report.jpg

Leave liability report

  1. Log into your payroll platform.
  2. Select Reports.
  3. Click on Leave Balance report.
  4. Set your filters.
  5. Click Run Report.
  6. Similar to the Leave balance report, the Leave liability report will show the annual holidays, where parental leave rules have applied, displayed as a separate line item and this is based on AWE rate calculations only. 
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