Earnings-Related Annual Leave

Generally, Crystal Payroll calculates annual leave using the employee's "Default Hours" set up inside their "Employee Details" page, but not in this case. With this option, the annual leave accrual calculations is switched to use the employee's gross earnings instead of default hours.

This option of accruing based on earnings instead of default working hours is best used when it is difficult to establish standard working hours due to a significant variation in the employee's working pattern. This is particularly useful for retail, hospitality, and healthcare industries, but is definitely not the only option for these industries.

As a good rule of thumb, you may consider this option if your employee is working hours that vary more than 15 hours each week. If you use this option under that circumstance, you should still ensure that the employee knows their leave is calculated based on their earnings and has agreed to this practice.

If you find that this option is not for you, but the employees do work considerably different hours each week, an alternative suggestion is to use a different option for accruing annual leave ("Week-Restricted" is the most recommended option if you are unsure), set the default hours as the employee's hours as per their IEA / CEA and review these after three months of employment, then every year on that date. If you need help remembering to do this renewal, check out our HR Module's pop-up reminders page.

To summarise this option, employees accrue based on their gross earnings each period, their annual leave is paid at their default hourly rate, and instead of the leave pay rate increasing when the employee is on leave, you instead adjust the quantity of hours you are paying for to comply with the greater of OWP and AWE rule as per the Holidays Act 2003.

How to Set It Up and Process


You can set this option up on the company-wide level so that it applies to all new employees by default, or you can enable this per individual employee

Setting this up as the company default

Please head over to "Company Settings" and 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".

Hit "Save" down the bottom of the page.

Setting this up per individual employee

Head to "Process a Pay", and then "Leave Pay Rate".

For each relevant employee, select their name along the left side of the page and enable the option "Use Default Hourly Rate for Annual Leave Pay" just below the annual leave rates on the right.

Processing the annual leave

When processing annual leave in the "Time & Income" page, when you have selected the "Annual Leave" action type, make sure you always select the information ( 🛈 ) button to the left of the "to be paid" checkbox.

A window for "Hours Converted from Weekly Pay" will pop-up, which will show information on the OWP and AWE rates.

The gross earnings from the past four weeks and twelve months are averaged out and compared against each other.

Please note: You should change the days the system is dividing over on the right-hand side of each "Daily Hours" line from "5" to however many days the employee tends to work each week. If you are unsure, a lower number is safer as it produces a higher value. e.g., Suppose an employee tends to work 3 or 4 days a week, then change the divisor to "3".

Please also note: You must always choose the higher calculation of the daily hours to ensure compliancy to legislation.

An Example of How It Works


Accruing based on gross earnings means the employee receives more annual leave if they work more and vice versa.

The calculation for this is: ( ( Gross Earnings ) x ( 4 / 52 ) ) / ( Default Hourly Rate )

Using one example,

( $772.85 x 0.076923 ) / $29

$59.45 / $29

= 2.05 accrued hours.