Annual Leave Adjustments

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Annual leave is accrued in FlexiTime with every pay. If you edit an employee and and go to the Leave tab, it is the Accrue Leave Based On section that determines how much leave is accrued, as explained in this article.

But what happens if you discover this has been set up incorrectly? Perhaps an employee's contract has changed and no one altered the leave tab to reflect the change. Sometimes we receive calls from companies where when setting up the employee a number of hours per day was entered instead of hours per week.

The first step when investigating historic leave issues is to run the Leave History report (Payroll > Report Tab > Leave Reports). The Average Rate Hours on the right of this report is the value on which leave accruals have been based.

If the error is found soon enough so only a couple of pays are affected, you can reverse out the pays and re-run.

Often the issue is only uncovered a year down the track when the employee enquires about their leave balance.

There are 2 implications of having an incorrect set-up for an employee:

1) The employees annual leave balance is incorrect. In particular the Annual Leave Accrued since <anniversary date> will be incorrect, but if the employee has passed a leave anniversary the Annual Leave Due as at <anniversary date> will also be wrong.

2) The average rate calculation that looks at 12 months of pay history will be based on the incorrect leave hours. The hours have been recorded against each of those historic pays and changing the accrual basis on the Leave tab will not adjust these.

Correcting Leave Balances

To update the annual leave accrued balance you will need to recalculate how much leave should have been accrued. There are two formulas for this, depending on which accrual approach is used.

If annual leave is to be based on a Normal Hours per Week then multiply the normal hours by the number of weeks leave per year (typically 4) to get the annual leave hours per year. Then multiply that by the proportion of the year that has been paid. So if the employee has had 11 weeks of pay, should have been on 20 normal hours per week and gets 4 weeks leave a year, then the amount of leave that should have been accrued is:

(20 x 4) x (11/52) = 16.92 hours.

If annual leave is to be based on Hours Worked, then find the number of hours they've been paid (the Report Centre is useful for this) and multiply it by the number of weeks leave per year divided by 52. So if the employee has worked 400 hours and is on 4 weeks leave a year then they should have accrued:

400 x (4/52) = 30.76 hours

If the employee has crossed a leave anniversary then you will need to do the calculations twice - once for all pays since the leave anniversary to calculate the Annual Leave Accrued since <anniversary date> and once for pays prior to the leave anniversary to calculate the Annual Leave Due as at <anniversary date>. You should also remember to deduct any leave taken prior to the leave anniversary from the Annual Leave Due.

Correcting Leave Rates

Firstly, decide whether you need to correct the pay history at all. Frequently employees are paid annual leave at their standard rate, or at the 4 week average, in which case the incorrect history over the previous 12 months can be ignored. If you are changing an employees accrual basis to be on Hours Worked then, unless they receive extra bonuses or commissions, you'll probably pay leave at their standard rate. Similarly, if they've recently received a pay rise then their new standard rate may be higher than their 12 month average.

You can adjust the Work Days and Average Rate Hours on individual pays for an employee.   Please see this article

 

 

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