Preventing Negative Annual Leave Balance: Payroll Guide

Preventing Negative Annual Leave Balance: Payroll Guide

Table of content

  1. What is a negative leave balance?
  2. Why do negative leave balances happen within pay runs?
  3. How can you prevent negative leave balances within pay runs?
  4. How can Workstem assist you?

What is a negative leave balance?

When an employee takes paid time off before they have acquired it, they are said to have a negative leave balance. Stated differently, the company is effectively lending or advancing the employee’s salary for any paid time off that they take before they have accumulated it. Recently, Employment Hero Payroll added a feature that stops the processing of negative leave balances in the payroll.

Why do negative leave balances happen within pay runs?

Negative leave balances within pay runs can occur for several reasons, including:

  •  Employee has taken more leave than they have accrued: If an employee takes more leave than they have accrued, their leave balance will go into a negative balance.
  •  Manual adjustments: Errors in manual adjustments made by payroll administrators can result in negative leave balances.
  •  System errors: Technical issues or errors in the payroll system can also lead to negative leave balances.
  •  Miscommunication: In some cases, miscommunication between payroll administrators and employees regarding leave balances can result in negative balances.

It is important for organisations to have proper leave policies and procedures in place to prevent negative leave balances from occurring and to promptly address any discrepancies that may arise.

How can you prevent negative leave balances within pay runs?

Regardless of the size of the workforce, many businesses occasionally encounter the issue of having employees with negative yearly and personal/carer’s leave.

You can change your leave policies to include the following statements, for example, if you believe that things are about to get out of hand or have the potential to.Negative leave is limited to five days unless authorised by the managing director or head of HR, and any negative leave requires a medical certificate.

You can adjust your leave policy, but it’s best to discuss the changes with your staff first.

You have the right to ask an employee to produce a medical certificate or proof that the absence was taken for the reasons allowed by the personal/carer’s leave provisions under the Fair Work Act 2009 (Cth) (FW Act).

It is not against the FW Act for an employee to take more annual or personal/carer’s leave than they have accrued. It’s determined by the policies at work.

As a result, your policies might be altered to, for instance, permit the employee to take up to five days of additional leave beyond what has accrued.

Employees should be informed of any changes, just like with any other workplace policy introduction or modification. This is especially crucial while taking unfavourable yearly leave.

How can Workstem assist you?

Simplify your payroll process and ensure accurate pay rates with Workstem’s automated payroll system. Our pre-built modern award interpretation software covers 122+ awards and 34 EBAs, and keeps you up-to-date with penalty rates and other award entitlements.

Choose between our Standard and Advanced plans, and enjoy a range of benefits such as Fair Work compliance, an employee self-service App, and customised rule set.

Book a free demo with our payroll experts. Experience the efficiency and accuracy of Workstem today!

Read More:

Unlocking Annual Leave: The Ultimate Guide

Annual Leave Loading

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