Leave Cycle
The BCEA provides that an employee’s annual leave cycle is the 12 month period following their appointment date. SimplePay, therefore, uses the appointment date captured for each employee to determine their individual leave cycles.
However, some employers prefer to standardise this so that all employees are on the same leave cycle, e.g. 1 January to 31 December. Although this is not strictly correct, it shouldn’t be a problem as long as the employees are not receiving fewer leave days than the minimum entitlement below.
Entitlement
In terms of the BCEA, annual leave is paid leave and an employee is entitled to the same number of days that they would normally work in three weeks. Practically, this means that an employee’s minimum annual leave entitlement is calculated by multiplying their regular working days by three – e.g. if an employee works five days a week, they are entitled to at least 15 days annual leave each year (5 x 3 = 15). An employer may always grant the employee more leave than the act prescribes.
An employee is entitled to accrue a portion of their annual entitlement each pay period. This accrual continues during paid absences including maternity leave and long-term illness. This is calculated by dividing their annual entitlement by the number of pay periods in the year:
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- A monthly-paid employee working five days a week will be entitled to a minimum of 15 days of annual leave a year, which is calculated as 5 x 3. This result in an accrual rate of 1.25 days a month, which is calculated as 15 / 12 = 1.25.
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- A fortnightly-paid employee working three days a week will be entitled to a minimum of 9 days of annual leave a year, which is calculated as 3 x 3. This results in an accrual rate of 0.35 days a fortnight, which is calculated as 9 / 26 = 0.35.
- A weekly-paid employee working seven days a week will be entitled to a minimum of 21 days of annual leave a year, which is calculated as 7 x 3. This results in an accrual rate of 0.4 days a week, which is calculated as 21 / 52 = 0.4.
By default, SimplePay calculates employees’ leave entitlement based on the above rules using their full days per week, as configured in their regular hours. It is, therefore, important that this has been correctly set up. Please see the following article for more detail:
Alternative Calculations by Agreement
By agreement between the employer and employee, the above calculation may be replaced by one of two other options outlined in the BCEA. Rather than using the employee’s contracted regular days and hours, these calculations are based on days / hours actually worked:
- 1 day of leave for every 17 days worked; or
- 1 hour of leave for every 17 hours worked
Generally, an employee’s entitlement will work out roughly the same as those above using these methods.
SimplePay currently supports both options. More information about how to create leave entitlement policies for these alternative calculations can be found in the following section:
Granting Annual Leave
An employee is entitled to take all leave accumulated at any point in their cycle, on consecutive days. In the absence of an agreement to the contrary, annual leave is taken at a time that suits the employer.
An employer may not force / allow an employee to take annual leave during their notice period prior to termination of employment.
If an employer has a period of annual shutdown, they may stipulate that annual leave has to be taken to coincide with this. If an employee has exhausted their annual leave before this time, the shutdown period may be treated as unpaid leave. For more information on these topics, please see the following section:
Unused Annual Leave
Any unused annual leave may be carried forward to the following 12 month cycle but must be taken within the first 6 months, during which time the employer may not refuse a request to take such leave. Please note that SimplePay does not currently enforce this aspect of leave management by default.
The employee and employer may not agree that unused leave be paid out in lieu of being taken. The only time that unused leave may be paid out is upon the termination of the employee’s service. More information on this aspect is available in the following related article: