Paying out annual leave

ANSWER ID:4419

When employees take Annual Leave you should always pay it out using the Annual Holiday (ANHL) pay code.

Annual Leave or Holiday Pay - what's the difference?

Here's a brief overview - see the Department of Labour website for more information.

Holiday Pay

8% of gross earnings since the employee's anniversary date.

It rolls into Annual Leave once they reach the first/next anniversary and then it starts again at zero accumulating for the next year. Holiday pay is only ever paid out on two occasions:

The employee's final pay, or
Casual employees who receive it in their weekly pay (which must be clearly stated in the employee's contract)

Annual Leave

An entitlement that all employees are entitled to which equates to at least four weeks' paid holidays per year.

Employees receive their annual holiday entitlements on their first and subsequent anniversaries after starting work. Learn how MYOB Payroll calculates the annual leave rate.

Paying out Annual Leave

This should be done even if an employee has not yet become entitled to Annual Leave. Here's how to record annual leave:

From the pay entry screen click into the Quantity field for the Annual Leave (ANHL) pay code.
Enter in the required number of hours (or days if employee is set to days). Here's an example:
Complete and finalise the pay as normal. The leave taken will then be deducted from the employee's balance.

The payroll will then record this as annual leave taken in advance, in other words a negative value, as shown below.

Any annual leave taken in advance will be deducted when the employee's anniversary is rolled or a final pay is prepared.

Paying holiday pay

The Holiday Pay (HP) code is only used to record the accruing balance of Holiday Pay.

Holiday Pay should only be paid out in the following situations:

To a casual employee. This may be paid out 'as they go', but this would need to be clearly stated in the employee's Individual Employment Agreement.
When a 'final pay' is prepared. The software will calculate any Holiday Pay and Annual Leave owing to an employee when a 'final pay' is prepared.

Paying annual leave which spans multiple pay periods

When paying an employee annual leave, MYOB Payroll will calculate a daily rate of at least the greater amount of:

ordinary weekly pay (OWP) as at the beginning of the annual holiday, or
the employee’s average weekly earnings (AWE) for the 12 months immediately before the end of the last pay period before the annual holiday.

So when paying an employee for annual leave which spans multiple pay periods and the daily rate drops from the first period, you can override the rate to match.

To edit the rate

Go to Maintenance > Maintain pay codes.
Click the Annual Leave pay code.
Select the option Allow rate to be modified when entering pay details.

You'll now be able to manually edit the annual leave rate in the pay.

Have you paid Holiday Pay in error?

See our support note Fixing holiday pay paid in error.

What should I enter into the Holiday Pay % field

From 1 April 2007 all employees became entitled to 4 weeks Annual Leave and the percentage required for Holiday Pay accrual rose to 8%.

To ensure an employees' holiday pay accrues correctly, this percentage should appear in the Holiday Pay % field in the employees' Leave Details tab as shown below.

Note: If the employees are given an additional weeks leave, in other words 5 weeks, the percentage entered would need to be 10%.