Earnings-Related Annual Leave

Please see the main article here: https://crystalpayroll.freshdesk.com/en/support/solutions/articles/51000461992-annual-leave-settings-in-depth-overview

How Annual Leave Accrual Based on Earnings Works

Generally, Crystal Payroll calculates annual leave using the employee's Default Hours set in their "Employee Details" page. However, with this option enabled, annual leave accrual is calculated based on the employee's gross earnings instead of their default hours.

This method is ideal when it is difficult to establish standard working hours due to significant variations in the employee's schedule. It is especially useful in industries like retail, hospitality, and healthcare, but not limited to them.

A good rule of thumb: consider this option if your employee’s working hours vary by more than 15 hours each week. If used, ensure the employee understands and agrees that their leave is calculated based on their earnings.

If this option doesn’t suit your needs but employees still work varying hours, consider using the "Week-Restricted" method. Set the default hours based on the employee’s IEA or CEA, and review this after three months, then annually. To help manage this, our HR Module offers pop-up reminders.

To summarise this option: employees accrue leave based on their gross earnings, are paid annual leave at their default hourly rate, and instead of changing the pay rate when on leave, you adjust the number of hours paid to comply with the greater of OWP and AWE under the Holidays Act 2003.

How to Set It Up and Process

Setting this up as the company default

Go to "Company Settings", then "Payroll Settings".

Open "Leave Settings" along the top of the page.

Under "Leave Default Pay Rate":

Tick "Use Default Hourly Rate for Calculating Annual Leave Pay".

Click "Save" at the bottom of the page.

Setting this up per individual employee

Go to "Process a Pay", then "Leave Pay Rate".

For each relevant employee, select their name on the left. Then enable "Use Default Hourly Rate for Annual Leave Pay" below the annual leave rates on the right-hand side.

Processing the annual leave

When processing annual leave in the "Time & Income" page, after selecting the "Annual Leave" action type, always click the ( i )icon beside the "to be paid" checkbox.

A pop-up window titled "Hours Converted from Weekly Pay" will appear, showing information on the OWP and AWE calculations.

The gross earnings from the past four weeks and twelve months are averaged and compared.

Please note: Adjust the number of days the system divides over on each "Daily Hours" line from "5" to however many days the employee typically works each week. If unsure, use a lower number to produce a higher value. For example, if an employee generally works 3 or 4 days per week, change the divisor to "3".

Please also note: Always choose the higher daily hours calculation to ensure compliance with legislation.

An Example of How It Works

When accruing based on gross earnings, the more an employee earns, the more leave they accrue—and vice versa.

Formula: ((Gross Earnings) × (4 ÷ 52)) ÷ (Default Hourly Rate)

Example:

($772.85 × 0.076923) ÷ $29

$59.45 ÷ $29

= 2.05 accrued hours