An employee now has reduced hours but his leave has increased
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- Last Updated: Wednesday, 26 February 2025 14:22
When hours of work are decreased, the average takes time to catch up and therefore available and accrued can appear wrong. Available leave is a fixed item and earned by the employee having completed a year of employment under the conditions applicable during that time. This time stands - it will now last longer and there is nothing that can be changed about this. The value of accrued leave also cannot be changed as it is a percentage of gross earnings and cannot be altered.
Because the average rate is based around weekly earnings, the system is designed to maintain this amount of weekly pay. The problem is that reducing the employee hours-per-week base, to say half, means the accrued earnings, when divided by half, doubles the time per hour. So to maintain the previous weekly average when taking only 20 hours, (a new week) requires that the rate be double to maintain the same money. Over time this will drop as the history and therefore average adjusts.
So the situation is that the employee now has twice as much leave and gets paid double as well. While this may seem logically correct, clearly it's not fair to the employer and is in fact an unintended anomaly under the holidays act. The situation is actually classified as a changed work pattern and is better viewed as a termination and re-employment. The employee should take all available leave prior to the change. This is not very practical, but in dollar terms is what one is trying to achieve.
For hourly employees, the solution in KeyPay is to change the leave base per week to zero. This causes the average to be calculated entirely on archived time worked (which was at 40 hours per week) and not compare it to any standard leave base. The average rate will now remain as before, and as both money earned per week and time are now half, the future average rate remains accurate. However, it should be adjusted back again prior to leave roll-over if a standard amount of time, (20 hours) is to then be made available. If left at zero, only 4/52 of total time worked will be allocated, although it could be more due to the previous pattern. Set a review date reminder and a note about it.
Note that this does not apply to salaried daily employees who are paid in pay units - normally a 1. The leave base for days and hours, however, must be set to that actually being worked, as this, times the pay unit, determines the time in hours that are archived for each pay. So if working 4 days at 8 hours per day, 32 hours per week are linked to that weeks earnings. If one day of leave without pay was taken, the entered unit would be 0.75 and the time worked become 0.75 x 32 = 24 or three days. Thus the archive should always track correctly. If the average rate still appears wrong, check the above and also if lump sum payments have occurred. Setting the leave base to zero for daily based employees will not work and only make things worse.