Annual leave that was allocated during parental leave or in the 12 months following the parental leave period is calculated at average weekly earnings (AWE) only. This article shows you how to add this calculation to a timesheet.
Updated: October 2023
To pay out annual leave at the AWE-only rate after the parental leave period, you will use a Custom Pay Type.
*Annual Leave is usually paid out at the greater of AWE or OWP. *The AWE-only calculation is ONLY used for leave that was allocated during parental leave or in the 12 months directly after the parental leave period has ended.
Creating a Custom Pay Type for Annual Leave Adjustment
Custom Pay Types are created in the Employee Profile:
- In the Employee Profile, select the 'Pay Types' Tab. This will bring you to the screen as shown in this example.
- To create a Custom Pay Type for Parental Leave Adjustment, you have to set it up as a 'Normal pay type (taxed)'.
- In the 'Name' field, enter the wording you want to display on your employee's payslip. In this example, we use 'Parental AL' as an example only.
- Set the 'Rate' at -1. This means that when you've calculated the difference between the average and ordinary weekly rate, that amount can be entered in the timesheet.
- Set the rate to 'per unit'.
- Save this setting. You have successfully added this pay type to your timesheet pay type menu.
For more information on creating custom pay types, follow this link to our article with more examples of how custom pay types can be used.
Adding the Parental Leave Override to a Timesheet
To calculate the adjustment amount to be added to the timesheet, you will use the Annual Leave Liability Table located below the timesheet. Simply scroll down the timesheet page.
Let's have a look at the steps:
- Add 'Annual Leave' for the days requested to the timesheet as usual and Save the timesheet.
- Add a new row to the timesheet by clicking on the green + sign.
- Whatever you set the custom pay type to be named will appear as a pay type option in the dropdown menu on the left of this row. Select this payment type.
- In this example, we called the custom pay type 'Parental AL', so this is the pay type we will select.
- Calculate the difference between the OWP and AWE. Enter that amount in this timesheet row.
- Scroll down the timesheet to the Annual Leave Liability Table. The message box gives you the current OWP and AWE figures. Simply deduct the AWE from the OWP to get the difference.
- In this example, the employee's OWP is $ 1200 and their AWE is $ 710.35.
➡️Calculation: OWP - AWE which is (1200 - 710.35) = $ 489.65
- Note: This is a Weekly calculation. If your employee is taking fewer days than their ordinary week, you have to calculate the value of the days taken. Calculation: Above answer / by number of workweek days x days AL taken.
Example: If the employee ordinarily works 5 days a week and they are taking only 2 days of AL the calculation will be: ➡️(Answer / 5) x 2 which will be (489.65 / 5) x 2 = $ 195.86
- Update and Save this timesheet. The timesheet boxes will be green when the timesheet has been saved, as in the example.
Remember that this is a WEEK-based calculated amount. You will have to do further calculations if your employee takes less than a week of Annual Leave. See step 4ii.
That is it! You have now paid out annual leave at the AWE-only rate.