The Holidays Act serves to protect your right to time off AND fair pay
Any payroll that does annual leave in hours or days is NOT COMPLIANT

You are probably reading this because of concerns about your leave balances showing on your payslip. Great to have you here!

If your employer decides to show additional leave balance estimates on your payslip then you need to be aware
these are just estimates - they are not entitlements. SmoothPay makes an effort to assess your entitlements as a termination value and an estimated number of hours based on your contract rate.

Most payroll systems try to do annual leave in hours or days - NEITHER METHOD IS LEGAL - the Holidays Act stipulates that annual leave is accrued, valued and consumed in WEEKS.

Just because every other payroll does it this way does not make it correct - in fact we've proven time and again that using hours or days as the basis for annual leave will inevitably mean you have been paid incorrectly for your annual leave.

It doesn't matter that your last payroll provider is a big company or not - if they accrue, value and consume annual leave in hours or days then they haven't complied with the basic rules of the Holidays Act and you have probably been underpaid!

SmoothPay provides the only known commercially available payroll software that is compliant with both the Holidays Act 2003 and Parental Leave provisions related to payment of annual leave (annual leave that accrued whilst on Parental Leave or the 12 months following return to work).

What do the various balances on my payslip mean?

Your legal entitlement is...
Annual leave accrues at a rate of 4 weeks, once per year, on your anniversary of service.

The only pertinent value, accurate in every case, is the balance remaining from all your annually accrued leave (in weeks). This is your legal entitlement.

You do NOT have any entitlement to take leave in advance without your employer's consent, though if you have a compulsory annual closedown it is likely that your employer will pay you some or all of the time off in advance.

What about my estimated leave balance?
An estimate is NOT an entitlement - it's just an educated guess based on a variety of factors.

Anything other than your legal entitlement is subject to you understanding what the estimated balance means and how it was calculated.

You don't need a maths degree, but you do need to carefully follow the logical steps used in determining your estimated balance.

Here is an example from a payslip:
[Leave Balances are as at the START of this pay period]
Annual leave accrued: 3.000 Weeks, next accrual of 4 Weeks is due 02-Dec-2018 [this is your legal entitlement at the start of this pay period]
Estimated annual leave to date 58.976 hours, Estimated annual leave value to date $1415.43: THIS IS NOT AN ENTITLEMENT visit for more information
Estimated annual leave to date 5.696 weeks or 11.392 days: THIS IS NOT AN ENTITLEMENT and taking leave in advance is solely at the discretion of your employer

Leave balances are as at the START of this pay period...
This might not seem correct or logical, but think for a moment - if you were to ask your employer what your leave balance is at any point in time they will tell you your current balance. Any leave you take will come off that balance. If they look up your balance it will tell them your current balance. It makes perfect sense to show the leave balance as at the start of the pay period. If, when your pay period has been completed, you used or accrued some leave then your current balance and your next payslip will show the updated balance.

Annual leave accrued...
This shows you your legal entitlement as at the start of the pay period and when your next accrual of 4 weeks will occur.

Anything other than this is just an estimate (
and is therefore meaningless other than as an estimate).

Estimated annual leave to date in hours...
This is calculated as follows:
Of course this is NOT an entitlement to anything unless you leave. It is just an estimate.

It is important to note that termination values are re-calculated every time they are presented, and are subject to change every week. This is most especially true where you have an irregular hours contract, as Ordinary weekly earnings are deemed to be the average for the last 4 weeks, and compared against the 52-week average (the best of these is used). A regular employee uses their contract values for OWE vs AWE52. Fluctuations in 4-week averages are common and obviously have an effect on termination value calculations.

The "hours" are calculated by dividing the employee's contract hourly rate into the Termination value - nothing more or less. This is NOT an entitlement and it's not really leave at all - it's just an indicator. These values are estimates at best. The only factual data is the balance in weeks and the termination value.

Estimated annual leave to date in weeks and days...
This is calculated as follows:
  • Balance of leave remaining from last anniversary (your legal entitlement)
  • Plus a pro-rata portion of 4 weeks, calculated daily, since your last anniversary
  • Produces estimated weeks
  • Divided by your nominal days per week
  • Produces estimated days
Of course this is NOT an entitlement to anything. It is just an estimate.

Why show estimates then?
Because people demand to see these balances in hours and/or days (which doesn't make it right), even though they don't really mean anything at all.

Systems that actually calculate leave in hours or days are negligent and have caused millions of dollars worth of underpayments to staff over the years.

SmoothPay continues to be the leader in compliance and will continue to do so, regardless of what other payrolls might do.