Managing Leave MYOB Technology Pty Ltd 2013

Transcription

1 Managing Leave MYOB Technology Pty Ltd 2013

2 MYOB Australia Pty Ltd ABN Website: myob.com.au Disclaimer Information supplied by the member companies of the MYOB group (whether in user documentation and other literature, video or audio material, training courses, websites, advice given by staff, or provided by other means) is intended only to illustrate general principles, and may not be complete, accurate or free of error. As accounting standards, taxation requirements, legislation and the circumstances of individual businesses vary widely, this information cannot be considered authoritative and may not apply to your specific situation. You should obtain competent advice from a qualified accounting, taxation, information technology or legal professional before acting on such information. To the extent permitted by law, member companies of the MYOB group are not liable for any special, consequential, direct or indirect damages arising from loss of function, profits or data resulting from your application of such information. In the event that any of the above limitations are found to be unenforceable, the MYOB member company's liability is limited to the return of any fees or monies paid for the purchase of the product or service Trademarks MYOB, AccountantConnect, AccountantsEnterprise, AccountantsOffice, AccountEdge, AccountRight, AccountRight Basics, AccountRight Standard, AccountRight Plus, AccountRight Premier, AccountRight Enterprise, Accounting, Accounting Plus, Atlas by MYOB, MYOB BusinessBasics, BankConnect, MYOB CashBasics, ClientConnect, ClientConnect Plus, Exo, FirstEdge, LiveAccounts, Love Your Work, Mind Your Own Business, MYOB Making Business Life Easier, MYOB Atlas, MYOB ClientConnect, MYOB Enterprise, MYOB Exo, MYOB M Powered, MYOB M Power, M Powered Services, M Powered Bank Statements, M Powered Invoices, M Powered MoneyController, M Powered Payments, M Powered Superannuation, ODBC DeveloperPack, ODBC Direct, PowerPay, Premier, Premier Enterprise, RetailBasics, RetailHospitality, RetailManager, RetailManager Enterprise, RetailManager Professional, RetailManager Standard, RetailReady, Smarter Connections are registered trademarks or trademarks of MYOB Technology Pty Ltd and their use is prohibited without prior consent. Ceedata, Solution 6 MAS and Xlon are registered trademarks or trademarks of Solution 6 Holdings Limited, a member of the MYOB group. Adobe, Acrobat, Acrobat Reader, Adobe Reader, PDF, and PostScript are trademarks or registered trademarks of Adobe Systems Incorporated. AddressBook, Apple, imac, AirPort, ical, Macintosh, and QuickTime and the QuickTime logo are registered trademarks of Apple Inc. MobileMe SM is a service mark of Apple Inc. Mac and the Mac logo are trademarks of Apple Inc., used under licence. Brio Intelligence and Hyperion Intelligence are trademarks or registered trademarks of Hyperion Solutions Corporation, Ctree use by permission from Faircom, Dapper used under licence with Apache Software, NiXPS used under licence, WinForms control set and DevExpress controls used under licence from Developer Express Inc. Crystal Reports is a registered trademark of Crystal Decisions, Inc. in the United States or other countries. FlexNet Connect is a registered trademark of Flexera Software Inc. Google Maps card links included with permission. MasterCard is a registered trademark of MasterCard International Inc, xerces is licenced under Apache Software. Microsoft, Access, Azure, Excel, Internet Explorer,.Net Framework,Office, Outlook, Smart Tags, Ribbon Control Library, SQL Azure, SQL CE, Windows, Word and WFPToolkit, are registered trademarks or trademarks of Microsoft Corporation in the United States or other countries. DotNetZip is licensed under the Microsoft Public Licence. Fluent.Net is licensed under the Apache 2.0 Licence. N Log is licensed under the BSD Licence. LLBLGen is used under licence from Solutions Design bv. New Relic is a registered trademark of New Relic, Inc. JSon.Net is licensed under the MIT licence. Quicken and QuickBooks are registered trademarks of Intuit Inc. SM2DGraphView Copyright Snowmint Creative Solutions LLC snowmintcs.com. VISA is a registered trademark of Visa International Service Association. RightNow CX is a registered trademark of RightNow Technologies Inc. Sentry Spelling Checker Engine for Windows, copyright Wintertree Software Inc. BankLink is a trademark of Media Transfer Services Inc. Other products mentioned may be service marks, trademarks or registered trademarks of their respective owners. MYOB Technology Pty Ltd All rights reserved. No part of this publication may be copied, reproduced, utilised, transmitted, or distributed in any form by any means including photocopying, recording, mechanical, electronic or otherwise by any other party, without the prior written authorisation of MYOB Technology Pty Ltd. Edition: June MANAGING L EAVE

3 Entitlements Overview Entitlements include annual leave, personal/carer s leave, rostered days off (RDOs) and accrued days off (ADOs) that employees accrue under the terms of their work agreement. All entitlements are calculated as hours accrued, with a corresponding dollar value for reporting purposes only. If you employ lots of part timers who work different numbers of hours, calculating entitlements on a percentage basis is a more effective method. However you can set up different entitlements calculations if you have both Hourly and Salaried employees. As part of managing leave, each entitlement is also linked to a wage or multiple wage categories to ensure that the entitlement balance is reduced accordingly when leave is taken. As most entitlements are calculated in hours it is preferable to set up your employees as hourly rather than salary as it is a more efficient and consistent for managing all forms of leave. The process of managing your entitlements involves determining: 1. What entitlements need to be set up? 2. How is the entitlement calculated? 3. What wage categories are linked to the entitlement? 4. What needs to be exempted from the calculation? 5. Which employees are eligible to the entitlement? Overview of setting up a basic leave category - annual/personal leave In general for each leave accrual, you need to set up two payroll categories: a Wage category, which is used to pay the employee when leave is taken enter a name specify type of wage hourly or salary the pay rate if set to hourly specify the pay rate is linked to the respective Entitlement so when leave is taken the entitlement balance is reduced accordingly MANAGING LEAVE ENTITLEMENTS OVERVIEW 3

4 select the Automatically Adjust Base Hourly or Base Salary Details option (When you record leave, base pay amounts will be adjusted for the amount of leave paid an Entitlement category, which is used to calculate the amount of leave the employee accrues each pay run enter a name for the entitlement select a calculation basis linked to the respective wage category so the entitlement balance is reduced when leave is taken 4 M A N A G I N G LEAVE ENTITLEMENTS OVERVIEW

5 Entitlement Calculation Options If you employ lots of part timers who work different numbers of hours, calculating entitlements on a percentage basis is a more effective method. However you can set up different entitlements set to different calculation methods if you have both Hourly and Salaried employees. When setting up any entitlement category there are three different calculation options to choose from. Understanding how the calculation is made will allow you to determine which is the appropriate method for your situation. There are three choices for the Calculation Basis of the entitlement: Calculation Basis User Entered Amount per Pay Period Equals Percent of Equals Hours per This option allows you to enter an amount at the time the pay is processed each pay period. Choose this if the amount varies regularly. This option allows you to set the entitlement as a percentage of the number of hours of any wage category. This option can only be used with employees who have a pay basis set to Hourly. Choose the type of hours on which to base the calculation usually Gross Hours. It will calculate the entitlement based upon the number of eligible hours worked. This option allows you to specify a fixed number of hours to be automatically allocated every pay period, month or year, regardless of the actual hours worked by the employee. This would be used if you have employees whose pay basis is set to Salary. If you use this pay basis, a different amount of hours will apply to full time and part time employees, therefore more than one entitlement category will need to be set up. Formula on calculating annual leave or personal leave entitlement Hourly Employees This percentage is calculated by taking the number of hours of leave per year divided by the total number of working hours per year. Leave Entitlement: Total hours of leave per year Total hours worked per year Total hours of leave per year: 20 days x 7.6 hours = 152 hours per year Total hours worked per year: 52 weeks x 38 hours = 1976 hours Entitlement hourly rate: 152/1976 = or % NOTE : If a worker is paid for 38 hours plus 2 hours overtime, and both are included in Gross Hours, the system will calculate an entitlement on a weekly pay of % of 40 hours, or hours. In this example, overtime should not be included in the calculation. Therefore you would need to exempt the overtime wage category from the calculation, if using this method. MANAGING LEAVE ENTITLEMENTS OVERVIEW 5

6 By replacing the total number of entitlement hours per year, you are able to use the above formulae to also calculate personal leave. Salaried employees For salaried employees you would use the last calculation option and specify a fixed number of hours to be automatically allocated every pay period, month or year. If you allocate the fixed yearly hours, this value will be automatically divided by the amount of payments to be made to the employee in that year, determined by the pay frequency set up on the employee card. For example, 152 hours will be divided by 26 if the employees are paid fortnightly. NOTE : If you use the salaried method of calculating entitlements the software will automatically apportion the total number of hours per pay period. Therefore if for some reason the employee should not be accruing the full leave accrual for a particular pay period you will need to manually calculate the correct accrual hours and adjust it accordingly. 6 M A N A G I N G LEAVE ENTITLEMENTS OVERVIEW

7 In addition to setting up annual leave and personal leave there may be additional types of leave that you are required to set up. The following sections will step you through: Handling Time in Lieu Handling Roster Days Off Handling Long Service Leave Reporting Accruals as Liabilities on the Balance Sheet Handling Annual Leave Loading 1 Handling Time in Lieu (TIL) Sometimes employees work unpaid hours which they later take as a type of leave commonly known as Time In Lieu. For example, in some organisations, an employee may choose to work on a public holiday and rather than receiving pay for that day, they can take an equivalent number of hours as paid leave at another time. To be able to track and manage time in lieu effectively you will need to setup 3 payroll categories: Two hourly wage categories: one for when TIL is earned and one for when TIL is taken. One entitlement category which establishes a link between the two wage categories, used to increase and reduce the TIL entitlement balance as TIL is earned and TIL is taken. To setup a Wage category for unpaid hours used when an employee earns TIL 1 Go to the Payroll Command Centre, click Payroll Categories. Under the Wages tab click New. 2 Enter a name for the category such as TIL Earned. Make sure you select the Hourly option in the Type of Wages section. MANAGING LEAVE 1 HANDLING TIME IN LIEU (TIL) 7

8 3 In the Pay Rate section, make sure you select Fixed Hourly Rate of and ensure a rate of $0.00 is entered. 4 Click Employee and select any employees who are eligible for TIL. 5 Click OK to both the Employee selection window and the Wage Information window. To setup a Wage category for when an employee takes TIL 1 In the Payroll Category List window, under the Wages tab click New 2 Enter a name for the category such as TIL Taken. Make sure you select the Hourly option in the Type of Wages section. 3 In the Pay Rate section, make sure you select Regular Rate Multiplied by Ensure you select the option Automatically Adjust Base Hourly or Base Salary Details. 5 Click Employee and select any employees who are eligible for TIL. 8 M A N A G I N G LEAVE 1 HANDLING TIME IN LIEU (TIL)

9 6 Click OK to both the Employee selection window and the Wage Information window. NOTE : When setting up a new Wage Category ensure that you check whether it also needs to be exempted from other payroll categories such as Annual Leave or Personal Leave Entitlements that have been set up with a % Calculation Basis, to ensure it doesn t affect the calculation. To setup an Entitlement category to track TIL hours earned, TIL hours taken and the balance of TIL hours 1 In the Payroll Category List window, click the Entitlements tab and then click New. 2 Enter a name for the entitlement such as TIL Accrual. 3 Select the second Calculation Basis option and set it to equal 100 (%) of TIL Earned wage category. This means that all (100%) of the hours recorded against this unpaid hours category will be added to the TIL entitlement. 4 In the Linked Wages Category field select the TIL Taken Wage Category. This means that whenever an employee receives pay for a given number of hours through this wage category, the balance of this entitlement will reduce by that number of hours for that employee. 5 Click Employee and select any employees that are eligible for TIL. 6 Click OK to both the Employee selection window and the Wage Information window. Once all the applicable wage and entitlement categories are set up the process of managing time in lieu involves Recording Time in Lieu when it is earned Recording Time in Lieu when it is taken Reporting on the Time in Lieu balance MANAGING LEAVE 1 HANDLING TIME IN LIEU (TIL) 9

10 To record Time in Lieu when it is earned John Green is set up as an hourly employee and is paid weekly. During this pay period, he has worked on a public holiday as a normal day which he will get paid for but will also accrue the public holiday as TIL to be taken at a later date. Therefore when he receives his pay for this week it will include his standard weekly pay and 7.6 hours are recorded against the TIL Earned wage category. The inclusion of 7.6 hours against the TIL Earned wage category does not populate the amount column nor increase the Net Pay. However, it will automatically populate the TIL Accrual category which has been set up to track the TIL entitlement. To report on Time in Lieu Accrued You can also check the balance of Time In Lieu Accrued by displaying the Entitlement Balance Summary Report. 1 Go to the Reports menu and select Index to Reports. 2 Select the Payroll tab. 3 Click the Entitlements heading select the Balance Summary report. 10 MANAGING LEAVE 1 HANDLING TIME IN LIEU (TIL)

11 4 Enter the relevant dates and click Display. The following week, John arranges to use his TIL and takes a day off. So he is paid 7.6 hours of the TIL Taken wage category. This is in place of a normal day's work. That normal day's work is subtracted from the Base Hourly wage category used to pay ordinary work. To record TIL taken 1 In the Pay Employee window, enter the amount of hours taken as Time in Lieu against the TIL Taken wage category. The normal Base Hourly/Base Salary amount will be reduced accordingly if you have set up the TIL Taken wage category to automatically adjust the base hourly/salary hours. MANAGING LEAVE 1 HANDLING TIME IN LIEU (TIL) 11

12 Otherwise you must reduce the normal Base Hourly/Base Salary amount by the TIL amount if you haven t set the option to automatically adjust the Base Hourly/Salary hours. As the TIL Taken category had 7.6 hours paid against it and it has been linked to the TIL Accrual entitlement category, the end result is that John's TIL Accrual balance will also have reduced by 7.6 hours and the following report confirms this. 2 Handling Rostered Days off (RDOs) Under some employment contracts employees may be entitled to a Rostered Day Off (RDO). Where this entitlement is provided, the employee may, for example, work a 40 hour week but only get paid for 38 hours. As a result after 4 weeks the employee has worked 8 unpaid hours. These banked 8 hours are then taken as a RDO and the employee is paid for the 8 hours. To be able to track and manage RDOs effectively you will need to setup 2 payroll categories: 1 hourly wage category to record when the RDO is paid out. 1 entitlement category, to track the RDO accrued for the period and RDO taken. NOTE : If you have both Hourly and Salary employees you will need to set up 2 different entitlements as the calculation basis for each is different. To setup a Wage Category for RDO taken 1 Go to the Payroll Command Centre, click Payroll Categories. Under the Wages tab click New. 2 Enter a name for the category such as RDO Taken. Make sure you select the Hourly option in the Type of Wages section. 3 In the Pay Rate section, make sure you select Regular Rate Multiplied by MANAGING LEAVE 2 HANDLING ROSTERED DAYS OFF (RDOS)

13 4 Ensure you select the option Automatically Adjust Base Hourly or Base Salary Details. 5 Click Employee and select any employees who are eligible for RDOs. 6 Click OK to both the Employee selection window and the Wage Information window. To setup an Entitlement category to track the RDO accrued for Hourly employees 1 In the Payroll Category List window, click the Entitlements tab and then click New. 2 Enter a name for the entitlement such as RDO Accrual Hourly Employees. 3 Select the second Calculation Basis option and set it to equal 5 (%) of Gross Hours. The percentage calculation is determined as follows: RDO Leave Entitlement: (HWD/FQW) HWW Hours in a Working Day (HWD) Frequency of RDOs in weeks (FQW) 38 hours a week / 5 days = 7.6 hours per day 4 (1 RDO every 4 weeks) Hours in a Working Week (HWW) 38 Percentage Calculation (7.6/4)/38 = 0.05 = 5.00% MANAGING LEAVE 2 HANDLING ROSTERED DAYS OFF (RDOS) 13

14 4 In the Linked Wages Category field select the RDO Taken Wage Category. This means that whenever an employee is on an RDO the hours are assigned to this category and the balance of this entitlement will reduce by that number of hours for that employee. 5 Click Exempt and select all pay categories that should be excluded from the accrual calculation. 6 Click Employee and only select any hourly based employees that are eligible for RDO s. 7 Click OK to both the Employee selection window and the Wage Information window. To setup an Entitlement category to track the RDO accrued for salaried employees 1 In the Payroll Category List window, click the Entitlements tab and then click New. 2 Enter a name for the entitlement such as RDO Accrual Salary Employees. 3 Select the last Calculation Basis option and set it to equal 1.9 Hours per pay period. The hours per pay period is determined as follows: Hours per pay period calculation: Hours in a Working Day (HWD) Frequency of RDOs in Weeks (FQW) (HWD/FQW) * WPP 38 hours a week / 5 days = 7.6 hours per day 4 (1 RDO every 4 weeks) Weeks per pay period (HWW) 1 Hours per pay period (7.6/4)*1 = 1.9 hours 14 MANAGING LEAVE 2 HANDLING ROSTERED DAYS OFF (RDOS)

15 4 In the Linked Wages Category field select the RDO Taken Wage Category. This means that whenever an employee is on an RDO the hours are assigned to this category and RDO the balance of this entitlement will reduce by that number of hours for that employee. 5 Click Employee and only select any salary based employees that are eligible for RDOs. 6 Click OK to both the Employee selection window and the Wage Information window. To record the RDO accrued After setting up the RDO categories as described above, pays can be processed to include RDOs. When you enter a pay for an employee and no RDO is taken, enter the pay as normal. RDO entitlements for selected employees will now be accruing. Using our example, 1.9 hours per week in RDO Accrual Entitlements will accrue (38 * 5% = 1.9 hrs) for each pay period. MANAGING LEAVE 2 HANDLING ROSTERED DAYS OFF (RDOS) 15

16 So for Week 1 to 3 a normal pay will be processed as follows: The RDO Accrual is tracked in the background. Therefore after 3 weeks of normal standard pays processed the accumulated hours accrued would be as follows. To record the RDO paid On the fourth week, when an RDO is taken by the employee, enter the appropriate number of hours taken against the RDO Taken wage category. If set up correctly the Base Hours can be set to automatically reduce by the number of hours taken. If not, you must reduce the number of Base Hours by the number of RDO hours taken. If the employee is salaried, the 7.6 hours of RDO are still paid against the RDO Paid category and the dollar amount of Base Salary is reduced by the amount being paid as RDO. 16 MANAGING LEAVE 2 HANDLING ROSTERED DAYS OFF (RDOS)

17 In the example shown below, one RDO is taken. So 7.6 hours is paid as RDO Taken and the Base Hourly will automatically adjust to 30.4 hours (38 less 7.6). If entered correctly the net pay should be the same as a regular working week. As displayed below by the 4th week, when the RDO is taken it will also result in reducing the employees RDO Accrual Entitlement back to zero. MANAGING LEAVE 2 HANDLING ROSTERED DAYS OFF (RDOS) 17

18 3 Handling Long Service Leave Long service leave is a period of paid leave for employees who have been working for the same business for a long period of time. Long service leave: is generally governed by state and territory laws can generally be taken after 10 years continuous service is generally paid at the employee s ordinary rate of pay can t be cashed out is paid out to eligible employees upon termination of employment (minus any amount already taken); and may apply to casual employees. When and whether you are required to track and report on long service leave will be dependent on your reporting requirements. In most cases whilst LSL accrues from the first day of employment, it is only available to the employee after 7 years of employment pro rata. Most businesses therefore do not show the accrual for this type of entitlement until the 7 year period of employment is reached by the employee. You will need to check your LSL obligations with your accountant or relevant wage authority. Further information about state specific long service leave requirements can also be accessed from the following Fair Work website link: leave and conditions/leave and public holidays/pages/long service lea ve.aspx To be able to track and manage Long Service Leave (LSL) effectively you will need to setup 2 payroll categories: A linked Wage category which is used to pay an employee when leave is taken and which reduces the balance of accumulated hours. An Entitlement category which calculates the number of hours an employee accumulates from pay period to pay period. The example used is based on the following payroll information: A full time employee who works a 38 hour week and is paid weekly. The calculation of LSL is based on being entitled to 13 weeks of long service leave accrued after 15 years of continual employment. To setup a wage category for LSL paid 1 Go to the Payroll Command Centre, click Payroll Categories. Under the Wages tab click New. 2 Enter a name for the category such as LSL Taken. Make sure you select the Hourly option in the Type of Wages section. 3 In the Pay Rate section, make sure you select Regular Rate Multiplied by MANAGING LEAVE 3 HANDLING LONG SERVICE LEAVE

19 4 Ensure you select the option Automatically Adjust Base Hourly or Base Salary Details. 5 Click Employee and select any employees who are eligible for LSL. 6 Click OK to both the Employee selection window and the Wage Information window. To setup an Entitlement category to track the LSL accrued 1 In the Payroll Category List window, click the Entitlements tab and then click New. 2 Enter a name for the entitlement such LSL Accrual. 3 Select the second Calculation Basis option and set it to equal (%) of Gross Hours. If for example the entitlement is 13 weeks for every 15 years converted to hours as a percentage it would be. LSL Leave Entitlement: LSL Hours Hours of Qualifying Period LSL Hours Hours in Qualifying Period 13 x 38 = 494 hours (15 x 52) x 38 = hours Percentage Calculation 494/29640 = = % 4 Select whether the accrual should be printed on the employees Payment Advice. 5 Ensure Payroll Year End is selected to Carry Remaining Entitlement Over to the Next Year. MANAGING LEAVE 3 HANDLING LONG SERVICE LEAVE 19

20 6 In the Linked Wages Category field select the LSL Taken Wage Category. This means that whenever an employee takes LSL the hours assigned to the LSL Taken category and LSL Accrual entitlement will reduce by that number of hours for that employee. 7 Click Exempt and select all pay categories that should be excluded from the accrual calculation. 8 Click Employee and only select any hourly based employees that are eligible for LSL. 9 Click OK to both the Employee selection window and the Wage Information window. If this is set up from the day the employee starts LSL will automatically accrue in the background. Therefore the accrued value will be available for you to report on. However in this example we will assume that we only start reporting on the LSL entitlement once an employee has reached their 7 year anniversary. As Peter Nelson is a long term employee, on his 7th year anniversary we want to work out manually what he is entitled to and assign it to the LSL accrual category as an opening balance. To calculate the LSL entitlement balance as at 7 years 1 Based on formulae above we need to work out the % of the Gross hours worked in the 7 year period. Working Weeks over 7 Year period Gross Hours in 7 year period Gross Hours * % (7years x 52weeks) = 364 weeks 364 weeks x 38 hours = hours x % = hours To record the LSL entitlement balance at 7 years Once an employee has completed the required period of continuous service as stipulated by legislation, the employee is eligible to take their LSL. However once they reach 7 years service they are entitled to have their LSL paid out pro rata, upon termination of employment. In this example it is therefore worthwhile to start tracking the entitlement from 7 years onwards. 20 MANAGING LEAVE 3 HANDLING LONG SERVICE LEAVE

21 1 Record a void cheque to assign the opening entitlement balance of LSL accrual hours for Peter Nelson as follows: NOTE : LSL is a little different from other kinds of leave in that many employees resign before they become entitled to it. And many businesses don t need to accrue provisions for LSL until an employee has been working continuously for their employer for at least 7 years. In some instances, the most pragmatic approach is to make a journal once a year for the projected value of LSL owing to employees As displayed below, once the payment is recorded the LSL Accrual entitlement balance is updated. MANAGING LEAVE 3 HANDLING LONG SERVICE LEAVE 21

22 To record the LSL accrual from 7 year onwards Each pay period from 7 years on will continue to accrue the LSL entitlement for Peter Nelson at a rate of % of Gross Hours. Therefore in his next pay along with his standard pay details the LSL accrual is activated and will continue to add to his entitlement balance. This is reflected below as displayed in the Entitlement Balance Summary report. If an employee goes on LSL or is terminated then when you process the termination payment you will also need to payout the LSL component against the LSL Taken wage category. Assuming the employee is now on LSL then in his next pay will need to be recorded as follows. 22 MANAGING LEAVE 3 HANDLING LONG SERVICE LEAVE

23 To record LSL when it is taken In the Pay Employee window enter the number of hours against the LSL Taken category. NOTE : Leave. Annual Leave, LSL, Personal Leave will continue to accrue even though the employee is on Long Service MANAGING LEAVE 3 HANDLING LONG SERVICE LEAVE 23

24 4 Showing leave accruals as liabilities on balance sheet There may be an expectation for some businesses to make accounting provisions for their leave balances, at least once a year, so their employees holiday leave, sick leave and long service leave is not only set up to accrue in hours but is also displayed in dollar terms in their general ledger payable accounts. There are five steps to recording your leave accruals as liabilities: 1 Set up your liability and expense accounts. 2 Link your liability or expense account to your leave wage categories. 3 Display or print your reports to determine your accrued dollar amounts. 4 Recognise your accrued liabilities using general journal entries. 5 Update your accrued liabilities using general journal entries. To create new liability and expense accounts 1 In the Accounts List window click the Liability tab. 2 Click New. 3 In the Profile tab, enter an account number and appropriate account name, for example, Annual Leave Accrual. 4 Click OK. 24 MANAGING LEAVE 4 SHOWING LEAVE ACCRUALS AS LIABILITIES ON BALANCE SHEET

25 5 Repeat above steps to create all other liability accounts such as Personal Leave Accrual. 6 Create expense accounts, using the steps above, giving them appropriate names (for example, Wages & Salaries Leave Expense). These expense accounts will be used to record the general journal entries. To link accounts to wage categories In the Wages Information window of the applicable Wage category. 1 Select the Override Employees Wage Expense Account option. MANAGING LEAVE 4 SHOWING LEAVE ACCRUALS AS LIABILITIES ON BALANCE SHEET 25

26 2 Click the search icon beside the Override Account field and select the appropriate liability account. 3 Click Employee and select those employees to which the category applies. 4 Repeat as required for any other wage categories such as Personal Leave. By showing leave accruals as a liability we are expensing the leave as it is accrued and showing as a value owed by the business, therefore when leave is actually taken we are simply reducing the liability not incurring a cost. To display entitlements reports 1 Go to the Reports menu and choose Index to Reports. 2 Click the Payroll tab. 3 Under the Entitlements heading, select Balance Summary. 4 Enter the relevant dates and click Advanced. 5 Under the Filters tab, in the Display by field select Entitlement. 26 MANAGING LEAVE 4 SHOWING LEAVE ACCRUALS AS LIABILITIES ON BALANCE SHEET

27 6 Click Run Report. A sample of the report appears below. MANAGING LEAVE 4 SHOWING LEAVE ACCRUALS AS LIABILITIES ON BALANCE SHEET 27

28 To recognise accrued liabilities using the general journal entries. 1 From the Entitlement Balance [Summary] report (printed or displayed), obtain the dollar amounts you want to record as your liability. 2 In the Accounts command centre, click Record Journal Entry. 3 Select the expense account for the leave expense and enter the dollar value of the accrual as a debit. The tax code would normally be N T. 4 Select the liability account for the leave liability and enter the dollar value of the accrual as a credit. The tax code would normally be N T. 5 Click Record. 28 MANAGING LEAVE 4 SHOWING LEAVE ACCRUALS AS LIABILITIES ON BALANCE SHEET

29 To pay leave when taken 1 In the Pay Employee window the amount of hours taken need to be assigned to the Annual Leave Wage Category. In this example we have called this wage category Annual Leave Liability. Once the pay is recorded the liability account linked to this wage category is reduced automatically. To update accrued liabilities using general journal entries 1 Check the current balance of your liability accounts. 2 Display or print the Entitlement Balance [Summary] report, (see section To display entitlements reports above). 3 Calculate the current dollar value of your outstanding leave accruals and work out the difference. 4 In the Accounts command centre, click Record Journal Entry and enter a journal entry to reflect the difference calculated in step 3 above. MANAGING LEAVE 4 SHOWING LEAVE ACCRUALS AS LIABILITIES ON BALANCE SHEET 29

30 5 Select the expense account for the leave expense and enter the dollar value of the accrual. If you are increasing your liability, the amount will be a debit. If you are decreasing your liability, the amount will be a credit. The tax code would normally be N T. 6 Select the liability account for the leave liability and enter the dollar value of the accrual. If the expense amount was a debit, the liability amount will be a credit. If the expense amount was a credit, the liability amount will be a debit. The tax code would normally be N T. 5 Handling Annual Leave Loading Some federal and state awards provide for annual leave loading for employees taking annual leave. This is generally calculated at a rate of 17.5% and is subject to certain rules in relation to PAYG Withholdings. This support note explains how to correctly record leave loading payments with your software. Under the terms of most awards, the loading is strictly payable only on the award rate. It is usually paid on the rate of pay actually received. If you are uncertain about this please check with the employee's relevant award or employment agreement. As of 1 July 2012, the tax free component of leave loading was removed. This means that all leave loading is now taxable. To set up leave loading category 1 In the Payroll command centre, click Payroll Categories. 2 Click New and in the Wages Name field, enter Annual Leave Loading to create a new Leave Loading wage category. 3 Click the Hourly option and in the Regular Rate Multiplied by field enter , assuming a 17.5% rate of leave loading. 4 Click Employee and select any employees who are eligible for leave loading. 5 Click OK to both the Linked Employees window and the Wages Information window. 30 MANAGING LEAVE 5 HANDLING ANNUAL LEAVE LOADING

31 To record the payment When processing your payroll, the Annual Leave Loading category will be available for use. When an employee takes leave, enter the number of leave hours in the Hours column for both the Annual Leave Pay category and the Annual Leave Loading category. This will ensure the employee is paid their annual leave, and their leave loading. MANAGING LEAVE 5 HANDLING ANNUAL LEAVE LOADING 31