Processing parental leave (New Zealand)

In this article we look at processing Parental Leave.

This article applies when Holiday Pay is setup in Days or Hours. When Holiday Pay is setup in Weeks, refer to White Papers available here.

While an employee is on Parental Leave they continue to accrue holidays as normal. Their period of Parental Leave is not classified as Unpaid Leave but is dealt with as a continuation of employment. This means an employee will continue to become entitled to 4 weeks Annual Holidays as per usual, even though they are away on Parental Leave.

When an employee returns from Parental Leave, they are able to take holidays that they became entitled to while they were on Parental Leave. However, the Holiday Pay entitlement that the employee became entitled to during the period of Parental Leave and in the 12 month period after they return from Parental Leave are paid at the Last 12 Months (Average Weekly Earnings (AWE)) rate only. The value of any Holidays taken directly after returning from Parental Leave is likely to be very low, depending on how long the employee was away on Parental Leave, but will build back up over the following months.

Click here to view an article on NZ at Work's website regarding Parental Leave.

The MYOB Exo Payroll software has no specific settings for Parental Leave. We recommend the following procedure:

To apply parental leave in a current pay

Include the employee in your Current Pays (do not terminate them and do not use the "Due back date"). In the employee's Standard Pay, ensure there is no Gross Taxable Earnings figure - clear any wages, salary, allowances or deductions. The Days Paid (or Hours Paid) section must show the normal figure for the pay frequency (i.e. 5 days or 40 hours if paid Weekly).
During the period the employee is on Parental Leave, process Current Pays as normal for that employee. If step 1 has been done then when the Current Pay is updated the employee will be paid $0 but the Days Paid (or Hours Paid) will go through to affect the Last 12 Months calculations. If step 1 has not been done then in each Current Pay ensure that the employee has Gross Taxable Earnings of $0 but still has the Days Paid (or Hours Paid) figures.
Once the employee has returned from Parental Leave the Standard Pay can be reinstated. Enter the wage hours or salary along with any allowances or deductions.

Paying holiday days

If the employee takes any holidays that they became entitled to during the Parental Leave period or in the 12 months after returning from Parental Leave, this leave should be paid at the Last 12 Months (Average Weekly Earnings (AWE)) rate only.

The Payroll software does not differentiate between days the employee earned prior to Parental Leave and those earned during or in the 12 months after Parental Leave. It is recommended to track any leave days that should be paid at AWE only in a spreadsheet and keep it updated until that balance reaches 0.

Due to this, the system will always value Holiday Pay at the higher of AWE vs OWP - you will need to manually adjust the value of any Holiday Pay days that were earned on Parental Leave or in the 12 months afterwards to pay them at AWE only.

The Holiday Pay report will reflect normal rate calculations and will be incorrect for any employee on Parental Leave or within the 12 Month period after returning from Parental Leave.

The Last 12 Months (AWE) rate for Holiday Pay can be found from the 12 Month Average rate shown on the 'Pop-Out' screen to the right of the Current or One Off Pay screens (shown above) or calculated as follows:

To pay holidays

Go to the Holiday Pay tab of Employee Maintenance for the employee. Check the Last 12 Months figures and manually calculate the rate.
When paying Holidays, go to the Leave Management section of the Current Pay and enter the number of units of Holiday to be paid. The software will show an amount appropriate to the normal holiday calculations. Manually multiply the number of units to be paid by the rate as mentioned above. Overwrite the amount calculated by Payroll with the amount you have just calculated.

Need more help? You can open the online help by pressing F1 on your keyboard while in your software.

You can also find more help resources on the MYOB Exo Employer Services Education Centre for Australia or New Zealand.