Summary

LWOP refers to periods of unpaid leave that break the definition of continuous employment with respect to an employee's entitlement to Annual Leave. (refer to the Holidays Act section 16(2)(b))

How does LWOP impact Annual Leave

Each time an employee takes a period of LWOP for longer than 1 week, the employee and employer must agree (preferably in writing) how this will impact the employee’s annual leave going forward. The options as per the Act are:

• Move the entitlement due date

  The employee's current Annual Leave End date will be moved into the future by the number of calendar days they took that exceeded 7.

• Reduce the AWE rate's divisor

  Normally the AWE rate is sum of employee's gross earnings over the 12 months prior to the end of the last payroll period before the annual holiday is taken, and dividing that figure by 52.

  If a single 2.5 weeks LWOP had been taken, then the first week doesn't count, so logically you'd think the divisor is to be reduced by 1.5 but MBIE's guidance documents advise to round up to the next whole number, therefore the AWE divisor will actually be reduced by 2 until that LWOP event falls out of the 52 week lookback period when calculating AWE.

In PayGlobal, Entitlement date rule on the employee's Annual Leave table must be set in accordance with the last agreement made between the employer and employee.

Important: As the Annual Leave table is often shared by many employees, the recommended approach to take when there is a change in the treatment of LWOP is to move the employee to a different Annual Leave table, i.e. a replica of the one they were on, just with the opposite Entitlement date rule setting

How does PayGlobal keep track of LWOP events

Database set-up

To keep track of LWOP events, your database must have the following records set-up:

• LWOP Allowance

  LWOP allowances, i.e. “unpaid” leave allowances that do impact an employee’s Annual entitlements are recommended to be setup as follows:

• Type = usually a V. Leave Credit paid if employees apply for leave via PG ESS, but can also be an A. Allowance or H. Hourly
• Paying = No
• Taxable = No
• Show Weeks Absent = Yes
• Is LWOP = Yes

   

• LWOPWeeksUDA

  This is a system generated UDA record. If it is missing from your NZ database please contact Support.

Transaction Entry

The key fields needed to complete LWOP calculations are:

• Weeks Absent - The amount is expected to reflect the calendar weeks absent between the Transaction Start/End Dates.

  If you don't supply this value, PayGlobal will calculate it for you. Example: If employee had LWOP transaction covering Mon - Fri, the calculation will 5/7 = 0.71 rounded up to 2dp.

  You might expect that number to just be '1.00’ if their usual work week was Mon-Fri. Unfortunately, further software improvements are still necessary to determine what defines a date effective work week, especially for those employees on cyclic and variable work patterns.

  If you need the Weeks Absent to represent something other than a calendar week-based calculation, you must manually override the system calculated “Weeks Absent” value or use Import Pay if the data is coming from a 3rd party.

  If PayGlobal calculates the “Weeks Absent” for you, a Warning will be included in the process pay “detail” audit log to advise you that this has been done. The warning will say:

• Absence Start Date - This date enables PayGlobal to link LWOP transactions that are spread consecutively across multiple pay periods. The date to be recorded is expected to be the very 1st day the employee was absent in this given LWOP period, i.e., the date can be before this pay’s start date if the employee was absent last pay or more pays ago

Process Pay

When you process a pay PayGlobal will do the following:

• Group 'unpaid' leave transactions by PaySequence, EmployeeCode, AbsentStartDate and “IsLWOP”.
• Create a consolidated record(s) for the CurrentUnpaidLeave database table - this is necessary to PayGlobal determine whether to exclude the 1st weeks or part thereof correctly when the LWOP event is made up of multiple transactions within one or more pays.

  The reason for capturing all unpaid leave not just LWOP is to assist with any future remediation work that may arise if an allowance was incorrectly configured as well as for future reporting of absenteeism.

• Create a the LWOPWeeks UDA record - this will have a value that might be equal to the Weeks Absent or it might be reduced if its part of the 1st week's absence.

  On allowances where "Is LWOP" is set to yes populate this UDA.

• Calculate the new employee AL End Date by (if applicable - refer to Entitlement Date Rule)

Close Pay

Commits the proposed changes made during process pay to their permanent storage location.

What if the employee takes multiple periods of LWOP each less than 1 week?

An employee can take many periods of LWOPs within a 52 weeks window, but only those where its a continuous period is greater than 1 calendar week impact Annual Leave entitlements.

The period of LWOP ends when the employee comes back to work, so this means non-work days are included in the count.

Further reading

See the PayGlobal LWOP Help Article