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Minimum percentage of Gross to Annual Leave Entitlement process


This document provides guidance on how to manage leave entitlements within our product. We recommend that you read the MBIE document Holidays Act 2003: Guidance on annual holidays, domestic violence, leave, bereavement leave, alternative holidays, public holidays and sick leave to understand how to meet your obligations as an employer under the Holidays Act 2003. If you have further questions or are in doubt, it is best to seek legal advice to ensure you are meeting your obligations.


The Holidays Act 2003 provides all employees 4 weeks Annual Holidays after 12 months’ continuous employment. Ensuring that your employees receive their full entitlement each year is an important part of your obligations under the Act. To manage Annual Holidays for your employees you need to ensure you have an agreement with them on what a working week means (i.e. how many days or hours), this must genuinely reflect their working pattern at the time of any holidays taken.

Given the need to ensure you know how much time your employee is entitled to for Annual Holidays, if you use the min % of gross method in Ace Payroll, you will need to move your employees to the Annual Leave Entitlement method. This will provide an allocation of time and is the only way for the product to automate management of your employees leave balances.

If you continue to use min % of Gross you will need to manage the entitlement for time manually outside of the product. This is because the min % of gross method allocates 8% of your employee’s gross earnings for every hour you pay them rather than allocating (or accruing) a period of time. As this method will only allocate dollars for payment it is okay for fixed term employment agreements less than 12 months however is not applicable to permanent employees where you are always required to provide an entitlement to time.


To convert employees from min % of Gross to Annual Leave Entitlement method
  1. Set the correct employee leave profile for Annual Holiday entitlement.
    This requires you to have an agreement with your employees on the genuine definition of a working week, this includes those working variable or irregular hours. You will need this to determine their Annual Leave entitlement, based off that agreement i.e if you agree with your employee that their working week is 3 days, this will give them an entitlement to 12 days per year. If this pattern changes you must update the balance as per the Managing Holidays in Weeks guide.

  2. Manually calculate an opening balance.
    Because the min % of gross method does not allocate time for Annual Holidays, you won’t have a day’s balance for employees in Ace Payroll so this will need to be manually calculated. The following calculation is the same in every scenario however the data source you use in the calculation will be different depending on how you capture time data for your employees. If you have employees with varied working days, you will need to try to find a pattern of work or agree an averaging method with them. If you are unable to find a pattern of work and are unsure of your obligation’s you will need to seek advice from your business advisor.

Manual process to determine days balance

The calculation:

Number of Years (at least 6 years from last Anniversary)

X (days per week x 4 weeks)

- Days you have paid Holidays

= Balance

Data sources for determining Balance


Do you record Days worked each week (Agreed work pattern) in the employee leave profile in your employee details?

  • If no, you will need to use a different data source.
  • If yes, go to Modify Employee details > Select Employee > Leave tab. The Employee Leave Profile will show.

Is this agreed with your employee that this is their definition of a week for Annual Holidays and you are comfortable it genuinely represents a week for them?

  • If yes and it is accurate as above and has never changed you can use this for the calculation.
  • If no, you will need to agree the definition of a week for future leave entitlement and use another data source to determine the current balance.

If the Leave Profile shows “Works Irregular Hours”. Click into the keyboard > deselect Works Irregular Hours (if selected), to allow you to enter a leave profile. Click GO.

No Data in the System

If there is no data present in the system, you will need to use alternative sources to determine the work pattern. These can come in the form of Timesheets or Roster data.

No Data at all

If you do not have time records to establish a balance of Annual Holidays, you may need to seek advice on how to proceed outside of assistance MYOB is able to offer. Your business advisor or MBIE position statement/advice may be helpful.

MBIE website

Learn more about the Labour Inspectorate's Position Statement

To determine days paid

Once you have a balance of Annual Holiday entitlement for your employees, you will need to deduct any days already paid for Annual Holidays to arrive at a current balance owing.

  1. Produce a Leave Paid Report (to go into Leave Records for each employee). This report can be used to determine the days paid for Annual Holidays.
  2. Select Date Range (bottom of report) > Select the Dates > Click GO.
  3. Select the employee > Click into Holiday amount > This will open the Leave Records of the employee (Leave Reports).
  4. In the Holiday window, refer to the Days column.
To set up Ace Payroll

Once an opening balance of Annual Holidays is agreed upon, follow the process below.

Changing employees from Minimum Percentage of Gross to Annual Leave entitlement:

  1. Click into Employee > Modify Employee details.
  2. Select employee from drop down menu > Click into Leave tab.
  3. Click into Holiday Pay.
  4. Click into Calculation Method > Select Annual Leave entitlement (or Annual Leave Custom).
  5. Click GO > Step 2 Confirm Regular Entitlements need to be entered.
  6. Confirm Regular Entitlements – Edit Days Worked Each Week to reflect the current agreed working pattern.
  7. Enter Opening Entitlements > Click into Opening Entitlement Date > Enter the date of the employees last Anniversary.
  8. Click into Opening Entitlement Days Owing > Enter the agreed days.
  9. Check First Anniversary Date > This needs to be dated for one year after the Opening Entitlement Date.
  10. Click GO > Click OK.
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