If an employee reduces their working hours, e.g. from 5 days per week to 4, FlexiTime will not automatically reduce their accrued annual leave.
This blog post discusses the reasons for this.
FlexiTime simply accrues leave as you go. If someone's weekly hours drop we don't automatically adjust the leave balances. This is something you need to yourself. So you will need to take the following steps to adjust as recommended by MBIE:
- Set Accrue Leave Based On Normal Hours per Week to the new weekly hours
- Adjust the following figures to be the same proportion of their current value as the new hours are to their old hours (e.g. 80% if changing from 5 days to 4 days): Annual Leave Due, Annual Leave Taken, Annual Leave Accrued.
- On the Pay Records tab, edit the average rate hours on each pay in the last 12 months to be the new weekly hours. This is what will increase the average pay rate.
The longer they leave it to take their leave, the lower the rate it will be paid out at.
However, there is a simpler approach that tends to make more sense to employees and it's worth considering if the leave balance isn't particularly huge.
If the only thing you change is their weekly hours (not reducing their leave balances), they will have more leave accrued which works in their favour. If they take that leave in the next month or two, there is barely any difference in what they would be paid compared to the more complex approach, since the average rate would have been heavily influenced by the 5 day weeks in the previous 12 months. It is only if they save up a lot of leave of their previous leave that they will get any sizeable advantage using this simpler approach than adjusting all the leave balances.
It means that the employee won't see any change in their leave balance and when they take leave it will be at or close to their standard rate. It won't gradually decrease over time which is very confusing. Given how much simpler and understandable this approach is, and that the employee is not disadvantaged you might like to consider it.