Annual leave rate calculation

ANSWER ID:2917

MYOB Payroll calculates the annual leave rate in accordance with the Holidays Act 2003.

According to the Holidays Act 2003

The rate at which Annual Holidays are paid at must be the greater of:

(i) the employee's Ordinary Weekly Pay as at the beginning of the annual holiday, or

(ii) the employee's Average Weekly Earnings for the 12 months immediately before the end of the last pay period before the annual holiday.

How does MYOB Payroll calculate the annual leave rate?

The Leave Rate Calculation window shows how MYOB Payroll calculations payment for annual leave.

The first calculation shows the previous 52 weeks Gross Earnings, divided by the number of weeks worked, which gives the Average Weekly Earnings. In this case the average is $1144.62

Directly below that is the Ordinary Weekly Pay. In this case the ordinary pay is $1240

If an employee has worked overtime or earned additional pay within this period, the Average Weekly Earnings will be higher than the Ordinary Weekly Pay. The Annual Leave Rate is based on whichever rate is the higher of the two.

For further information, visit the Department of Labour website.

When I run a Holiday Anniversary Update, why is the dollar value less than it was before?

Under the terms of the Holidays Act 2003, Holiday Pay (the accrued leave) and Annual Leave (leave which is due following 12 months continuous service) are calculated differently.

Holiday Pay

The calculation for Holiday Pay is at a flat rate of 8% of the Gross Earnings. The 8% roughly equals four weeks of annual leave. The holiday pay is accrued during the year and only applied to a final pay (if the employee is leaving employment), or to a Casual worker who requests that their Holiday Pay be paid out as they earn. (It is important that this fact is registered and signed off in their Employment Contract).

As an example of Holiday Pay, if the annual Gross paid is $52,000, then the Holiday Pay accrued would equal $4,160.00

Annual Leave

This calculation is different from the above Holiday Pay.

Using the scenario above and assuming that (a) the employee is on a salary of $52,000p/a and that (b) the employee works a 40 hour week:

4 weeks = 160 hours X $25 (the employees hourly rate) = $4,000

(The calculation is 4/52 X Gross, so the percentage is 7.6923% not 8%)

Should the employee leave, the $4,000 of Annual Leave would incur additional Holiday Pay of $320 (8% of $4,000).