About Holiday Pay

Holiday Pay Incrementing

All future activity on this particular screen is handled automatically by the program. As each pay is updated, the system will increment the days entitlement, days paid and days accrued, for the current holiday pay year.

Holiday Rollover

When you update a Current Pay that is dated within one pay period of the employee's holiday anniversary date, that employee's holiday year will roll over. In other words, the accrued days will instead become outstanding days, to indicate that the employee now has an outstanding balance (holiday pay owing). In addition, the accrued days will begin accumulating again, from zero, in recognition of the new holiday pay year.

Holiday Pay Methods

Certain fields in the holiday pay screen will enable/disable, depending on the contents of the leave management setup screen:

• permanent part time / pro-rata method enabled/disabled status
• percentage-only method enabled/disabled status
• holiday pay groups enabled/disabled status

and also the employee details tab

• salary/wage status
• full-time/part time status
• permanent/casual status

Because each method only enables fields which are relevant to that method it is necessary to choose the best method for your employee, based on their working and contractual conditions, before entering any data.

Normal (Percentage/Days) Method

This method requires you to estimate the worker's standard working week, and set a 4-week rule based on that (usually 20 days). This is naturally easier to predict for full time workers, and also part-time workers who work a regular number of days per week

By default, the Payroll system calculates holiday pay equivalent to four weeks of holiday pay per year. It does this by storing and accruing two important values at the end of each pay period:

• the days paid for the pay period (up to 5 days)
• the amount paid for the pay period (up to 7 days).

The accrual method assumes that one working week equates to (and does not exceed) 5 days. To achieve this, you will need to turn on the Pay Period Valuation method in the Leave Management Setup screen. This will fix the accrual to a standard five day per week. In other words, the holiday accrual will not be allowed to exceed 4 five day weeks of holiday pay.

Points to remember:

• The Payroll accrues over a five day week
• The Payroll averages over a five day week to arrive at a daily rate for holiday pay
• The Payroll gives four lots of five day weeks (20 days) as an annual entitlement at the end of the year

If you were to force the accrual method to exceed 5 days (i.e. turning off Pay Period Valuation), you could run into a situation where:

The accrual is over a six day week

The average is therefore over a six day week

The Payroll gives four lots of five day weeks (20 days) as an annual entitlement at the end of the year. You would have to override the Annual Entitlement to 24 days per year, to make your entitlement rule reflect your accrual and your average calculations. For many employers this is costly and impractical. Add to this the difficulty of estimating whether a six day week is the employee's usual work pattern, in order to qualify for 24 days of holiday pay.

Calculation Example:

Employee A earns $600 working Monday to Saturday, therefore 600 / 6 = 100. This employee occasionally works Saturday for more money.

Employee B earns $600 working Monday to Friday, therefore 600/5 = 120 (Payroll calculation)

It appears that Employee B will get less $20 holiday pay, on average.

This in fact will not be the case.

In Employees A's example he will get 24 days x 100 = 2400.

or he might get 20 days x 100 = 2000, should it be deemed that he did not in general work a six day week.

In Employees B's example he will get 20 days x 120 = 2400.

in effect Exo Payroll's calculation is easier to administer because you don't have to decide how many days are in a standard working week for all of the employees on a case-by-case basis, at the end of the year.

Permanent Part-Time / Pro-Rata

Unlike the Normal method, this calculation does not require you to estimate an employee's standard working week, which in any case is hard to do with employees who work irregular hours.

If an employee does not work set number of days per week, it is recommended that the Permanent Part Time / Pro-Rata holiday pay method be used.

This method applies the number of actual days paid across the year against a full timer's standard working year (usually 260 days), to find a proportion of the year worked. It then applies that same proportion against the full timer's standard yearly entitlement (usually 20 days).

Examples:

Days Paid = 260 Employee receives 260/260

= 1.000 x 205

= 20 entitled days of holiday

Days Paid = 200 Employee receives 200/260

= 0.769 x 20

= 15.38 entitled days of holiday

Days Paid = 130 Employee receives 130/260

= 0.500 x 20

= 10.00 entitled days of holiday

Percentage

Recommended for employees who are employed on a part-time basis, and whose hours/days per week fluctuate over the course of a year, to the point where estimating a standard number of hours/days per week for holiday pay valuation would prove difficult.

Under this method, employees will receive a lump sum of holiday pay as a separate dollar amount (from their wages) at the end of the holiday pay year. This method is not recommended for employees who are expected to work a full year.

If the employee starts out on the Percentage Method and completes a year of service, it is recommended that the employee is transferred to the Normal method (on their first holiday anniversary) and be left on that Method indefinitely.

For this method you have to specify the percentage entitlement that is applied to the gross paid per holiday pay year.

When the entitlement date is reached the employee will receive a percentage or their gross earnings as holiday pay.

Example:

Gross this holiday pay year = 38,000

Annual entitlement % = 8.00

= 38000 x 0.080

= $3040 entitled dollars

Casual

Recommended for employees who have an agreement with the employer to receive holiday pay with their normal pay whenever they are paid. In this instance you would enable the option to "Pay Holiday Pay Each Pay"

For this method you have to specify the percentage entitlement that is applied to the gross paid per pay.

Examples:

Current pay wages = $500, Entitlement % = 8.00

Employee receives in their pay 500 + (500 x 0.08)

= 500 + 40

= $540 gross taxable earnings