Summary

In Australia, employees may ask to receive annual leave as a 'cashout' payment instead of taking the leave.

Further Reading: See the National Employment Standards (NES) at http://www/fairwork.gov.au

To facilitate annual leave cashout payments, you need to:

1. Create a special cashed out annual leave allowance with Tax override = "Yes" and Tax override type = "Bonus".
2. In Transaction View:
   1. In the employee’s Pay Header, set Normal gross method to the appropriate value.
   2. In the annual leave cashout transaction, set the Tax overrides tab | Override amount field to the number of pays that the employee would receive in the tax year.

Create cashout allowance

You can create a annual leave cashout allowance by modelling the existing annual leave allowance.

1. Select the existing annual leave allowance.
2. Use Model Record to create an annual leave cashout allowance.
3. Make the following changes to the annual leave cashout allowance:

   Description = "Annual leave cashout"

   Details (i) tab | Tax override = "Yes"

   Details (i) tab | Tax override type = "Bonus"

When you process a cashout transaction, PayGlobal will use the marginal rates calculation instead of the standard PAYG calculation.

Marginal rates calculate PAYG as if the payment was made in equal parts throughout the current tax year. For example, if the employee is paid monthly, then the calculation assumes that the cashout amount was spread over 12 pays.

Standard PAYG calculates all income for the pay and taxes it in that pay. As a result, if the employee receives a one-off payment, then the PAYG amount is generally larger than if the pay was taxed at marginal rates.

Add cashout transactions

After you create the allowance, you can add annual leave cashout transactions to employees. However, to ensure that the transaction is taxed at the correct marginal rate you must:

1. Set up their Pay Header with the appropriate Normal gross method value.
2. In the annual leave cashout transaction, set the Tax overrides tab | Override amount field to the number of pays that the employee would receive in the tax year.

Pay Header - Normal gross method

An employee's Normal gross method value is the basis for the marginal rates calculation. The default Normal gross method value is determined by the Default normal gross earnings calculation value in Company Settings. However, you can override the default setting by editing the employee's Pay Header.

1. In Transaction View, select the employee's record.
2. Press Ctrl+P to see their Pay Header.
3. Select the appropriate Normal gross method option:

   LF. Last full pay

   Employee's normal gross value for their last full pay sequence.

   AV. Average gross earnings

   PayGlobal divides the employee's total gross taxable earnings in the current tax year by the number of pays made so far.

   OV. Override normal gross

   After you select this option, enter the required amount (which must be greater than zero) into the Normal gross amount field.

Transaction - Tax overrides tab

After you add an annual leave cashout transaction, you must enter the appropriate Override amount on the Tax overrides tab. For example, if the cashout is an annual transaction and the employee is paid weekly, then Override amount = 52.

Leave Loading on Cashed Out Annual Leave

If leave loading is attached to an Annual Leave Table, then PayGlobal must pay out leave loading on cashed out annual leave using marginal rates calculations.

The Allowances | Details (ii) tab contains a Loading cash-out allowance field that allows you to specify the allowance used for leave loading on cashed out annual leave. If you want to use this field, then you must set up the relevant annual leave cash-out and leave loading cash-out allowances correctly. PayGlobal must be able to reference the leave loading cash-out allowance from within the annual leave cash-out allowance.

Annual leave cash-out scenarios

If the annual leave cash-out allowance contains a Loading cash-out allowance with Calculation method = "K. Leave Loading using AL table Calculation", then PayGlobal will check the employee’s Annual Leave Table to determine the percentage for the leave loading cash-out transaction. If the Annual Leave Tables | Values tab does not contain % of entitled value and % of pro-rate value settings, then no leave loading is calculated for the cash-out transaction.

If the annual leave cash-out allowance contains a Loading cash-out allowance with a Calculation method that is not "K. Leave Loading using AL table Calculation", then PayGlobal will calculate leave loading based on the calculation method of the Loading cash-out allowance.

If the annual leave cash-out allowance does not contain a Loading cash-out allowance, then PayGlobal will use the Annual Leave Tables | Values tab | % of entitled value and % of pro-rate value settings. If the % of entitled value and % of pro-rate value fields are blank, then no leave loading is calculated for the cash-out transaction.

When you set up annual leave cash-out allowances, we recommend that you create:

• an allowance for use with annual leave tables that pay out leave loading using a separate allowance.
• an allowance for use with annual leave tables that do not pay leave loading using a separate allowance.