Holiday Pay - Annual Compulsory Closedowns

Legislation

Sections 29 to 35 of the Holidays Act 2003 cover the calculation of holiday pay where work ceases periodically.

The effect of these sections is

For an employee who has worked for more than a year, an annual closedown is no problem. You merely pay as many days leave as are owing. In this article we concentrate on employees that start during the year.

For an employee who starts during the year the situation is different. In this case, what you effectively do for holiday pay purposes is exactly what you would do if terminating the employee at the start of the closedown, then use the date of the closedown as the new start date.

The next sections show how this is done in Ace Payroll.

For an employee who starts during the year

Step 1 Set calculation method to Min % of Gross

When the employee starts, go to the Employee Modification screen, ensure the employee has a start date entered, then select Leave then Holiday Pay and ensure the holiday pay calculation method is set to Min % of Gross.

Save changes if any were made, then proceed to pay the employee for the rest of the year in the normal manner. That is all that needs doing until the pay week of the annual closedown.

Step 2 Last pay before annual closedown

Calculate the wages as usual, and include wages for time worked right up to the annual closedown.

Your employee may also be paid at this stage for some public holidays. Because these public holidays occur after the annual closedown, it is a fine point whether their payment attracts holiday pay.

If you want to pay holiday pay on the public holidays, calculate the payment for them before the holiday pay.

To not pay holiday pay on the public holidays, calculate their payment after the holiday pay.

From the pay calculation screen, click holiday pay. From the next screen shown, select Current Employee.

Then the following screen is shown

This is the holiday payment screen for an employee on the 8% of gross method that is continuing their employment.

Check, and if necessary print, the report of holiday pay owing.

Then tick Pay Total Owing.

Note that for a continuing employee you normally enter the number of holiday days being taken, but for the purposes of an annual closedown this is not neccessary, as the payment is more in the nature of a final pay. The number of days is irrelevant.

Step 3 Complete regular pay run

Calculate pays for all employees, and perform all tasks associated with a regular pay run. Then file the payroll.

Step 4 Change calculation method to Annual Leave

After the pays are filed, go to the Employee Modification screen for each employee who started during the year. Select Leave then Holiday Pay.

Change the calculation method to Annual Leave entitlement and check the annual entitlement is correct.

The system now accounts for leave with the emphasis on days rather than dollars.

Scroll down and note the following

Opening Entitlement Date
This has been automatically set to the date of the last pay period. The system knew to do this because you paid all holiday pay owing in step 2.

Opening Entitlement Days Owing
This field says None which is correct.

Full Year Average Daily Rate
This field reports a figure which is inaccurate because the employee has not been employed for a full year. Ignore it for the time being.

In a years time, when the employee is paid at the next annual closedown, enough information will be accumulated for a realistic figure to be used.

First Anniversary Date
This figure correctly sets itself to a year from the last pay period. That is, around the time of next years annual closedown.

Click GO to save changes, and the job is done.