How to pay weekly and biweekly employees for annual leave
You have to pay the employee his/her full salary/wage they would have earned during the period of leave. In addition, any fluctuating payments that the employee won’t receive during the period of leave, must be averaged over the preceding 13 weeks and paid in addition to the employee’s fixed salary/wage.
An employer must pay an employee Leave Pay before the beginning of the period of leave or by agreement, on the employee’s usual pay day.
In practice, monthly paid/salary paid employees are typically paid on their normal pay day, while weekly and biweekly/wage earners are typically paid their Leave Pay in the last period before they go on leave.
The system has a built-in Leave Pay function to help you pay your employees for annual leave.
Leave Pay FAQs
Must I use the Leave Pay function?
The Leave Pay function has 3 objectives:
- 1. To assist you to calculate the earnings, deductions, company contributions and fringe benefit values for the Leave Pay periods (i.e. the weeks while the employee is on leave),
- 2. To calculate the correct amount of Tax, UIF and SDL for the 2. Leave Pay periods,
- 3. To assist you to keep your leave transactions up to date, if you have the leave module.
So, even if you want to input the Leave Pay amounts manually, we advise that you activate the Leave Pay function to calculate the correct statutory contributions.
When must I activate Leave Pay?
Leave Pay must be activated in the last period the employee works and gets paid, before going on leave.
What happens when I activate Leave Pay?
The calculations for all the Leave Pay periods are done ‘in advance’. If you indicated that the system must calculate Leave Pay values for specific definitions, you will see the Leave Pay values for these definitions on the payslip.
The system looks at the following to calculate the Leave Pay value for a definition:
- is the definition flagged for Leave Pay on the payslip definition template linked to this cycle?
- what is the existing transaction value?
- for how many periods was this value entered?
- when is the value effective (every week, first four weeks only, etc)?
All statutory calculations are also done in advance, to ensure that the correct tax, UIF and SDL values are calculated.
What happens to the employees’ payslips while they are on leave?
The employees’ payslips are frozen while they are on Leave Pay, to ensure that you don’t accidentally process on their payslips while they are on leave. A red message next to the employee’s name indicates the remaining number of Leave Pay periods.
Certain fields, such as the employee’s tax status, that has an impact on the employee’s tax, UIF and SDL calculations are also disabled while the employee is on leave. The payslips will be active again when you roll into the period the employee returns from leave.
What must I do if the employee comes back to work early?
It sometimes happens in practice that an employee returns to work before the end of their Leave Pay period, and starts working again.
The employee’s payslip will be frozen, as the system is expecting the employee to still be on Leave Pay. In order to activate the employee’s payslip, you need to Deactivate Leave Pay. It is important that you understand the consequences of deactivating Leave Pay! Please refer to the Deactivate Leave Pay section below for more information.
What is the difference between Normal Leave Pay and Late Leave Pay?
Normal Leave Pay is used where the employees are paid at the end of the week for the current week’s work done. When Normal Leave Pay is activated, the employee will receive his last payment for work done as well as his leave pay payment. This will be the last payment until the employee returns from leave.
Employees are paid every Friday for hours worked from Thursday to Wednesday. The payroll is currently in 18 December 20xx, and the employees will be paid for work done from 12 – 18 December.
Late Leave Pay is used where the employees are paid for the previous week’s work done, so where they are paid in arrears. When Late Leave Pay is activated, the employee will receive his payment for work done the previous week as well as his leave pay payment. The next period will be used to make the last payment for work done.
Employees are paid every Wednesday for hours worked from Thursday to Wednesday of the previous week. The payroll is currently in
18 December 20xx, and the employees will be paid for work done from 5 – 11 December.
Indicate which definitions are payable during Leave Pay
Click on Company…Global Payslip Definition…Payslip Definitions Templates.
If you want the system to calculate the Leave Pay values, click on the icon next to the Earnings, Deductions, Company Contributions and Fringe Benefits you want the system to calculate.
A green icon indicates that the definition has been selected.
Click on the green icon to deselect the Leave Pay calculation for the definition.
Note that the LP flags are applicable for all cycles that are linked to the template.
Activate Leave Pay
Click on the Activate Leave Pay button to activate Leave Pay for the employee.
If you have not yet indicated which definitions are payable during Leave Pay, you will be able to do it now.
For weekly paid employees, you can enter 1 to 9 Leave Pay periods, where 1 period is 1 week.
For biweekly paid employees, you can enter 1 to 9 Leave Pay periods, where 1 period is 2 weeks.
If the leave module is active for this company, you can capture the employee’s leave transaction when activating Leave Pay.
Deactivate Leave Pay
It is not advisable to deactivate Leave Pay, unless the employee returns to work before their scheduled return date.
What should I be aware of if I deactivate Leave Pay?
- The employee has already been paid up to the end of the Leave Pay period.
- The system will calculate transactions from the period in which Leave Pay was deactivated – you will have to manually adjust all the values otherwise the employee will be paid again for the same period.
- The tax will be higher, as the period over which the employee has earned their wage is now shorter – when activating Leave Pay, the tax factor is calculated up to the end of the Leave Pay period. When deactivating Leave Pay, the tax factor is only calculated up to the end of the current period.
- You will have to manually correct leave transactions that were captured when activating Leave Pay.
Can I activate Leave Pay again?
Yes you can, however this Leave Pay activation will not take any previous Leave Pay activation into account.