Calculating Annual Leave

Calculating Annual Leave

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Calculating how much leave is due to an employee, can sometimes become extremely frustrating, especially if the employee only works a limited number of hours per week or per month. It becomes even more complicated when trying to determine what type of leave to allocate in the event of a family emergency or illness, or over a public holiday or forced annual shut down periods.

Here’s all the information that you need in order to ensure that you get annual leave calculations right every time:

Basic annual leave allocation

Annual leave is paid ‘vacation’ leave that employees qualify for at a rate of 1 hour for every 17 hours worked, or 1 day for every 17 days worked and it accrues in arrears (you have to have worked the days or the hours, to have the leave due to you).

Employees don’t need to give you any information about the reasons for requesting or taking annual leave, but you do need to keep records of how much leave is due and how much has been taken.

The average employee who works Mondays to Fridays from 08:00 to 17:00, works a total of 21.67 days per month and qualifies for a total of 15 working days’ paid annual leave per year.

Annual leave cycle

This is a 12 month period that starts on the first day that the employee commences employment with an organisation – it is not a ‘calendar year’. So, if an employee starts with you on 1 June 2011, their annual leave cycle starts on that same day, for 12 months, until 31 May 2012. On 1 June 2012, a new annual leave cycle of 12 months, commences.

Public holidays and illness

Public Holidays are not deducted from an employee’s annual leave and if a public holiday falls within a period of authorised annual leave, it is not counted as annual leave.

In the event that an employee falls ill during an authorised period of annual leave, you can request a medical certificate from a medical practitioner registered with the Health Professions Council of South Africa (HPCSA) and you can convert the period relating to illness, to ‘sick leave’ and credit the employee’s annual leave balance.

Forced annual shutdown periods

In certain industries, there may be a forced annual shut down period (ie construction, engineering, certain manufacturers) and employees need to be made aware of such shut downs. An employer may limit the number of annual leave days that an employee takes in the remainder of the year, so as to ensure that the employee has sufficient leave available to them over the shut down, or alternatively, if the employee does not have sufficient leave available, they may take unpaid leave.

Insufficient leave availability

In the event that an employee does not have sufficient annual leave days due and available to them, as an employer, you have two (2) options:

a)  Unpaid leave: in this scenario, every day that the employee is absent from work, is deducted from the employee’s monthly or weekly salary payment. You have to make the employee aware of this in advance and they need to understand the financial impact that absence will have; or

b) Convert to a ‘loan’: calculate the monetary value of the period of absence (you do this by working out the employee’s daily rate of pay: their monthly salary, divided by 21.67 equals their daily rate of pay). This can be converted to a ‘loan’ which the employee may either physically pay back on a monthly basis (and then still get their monthly leave days accrued to them), or they may just work back the time which means that you have effectively given them all of their annual leave in advance and the leave days are not accruing to them, but back to the company. This needs to be discussed with the employee and they need to agree to the terms in writing. This method is highly effective in the event where you are allocating leave in advance and you want to protect your organisation in the event of the employee’s resignation.

Communicate leave balances

You are legally required to inform employees on every payslip, how much annual leave they have due to them.

Leave administration

In order to reduce the likelihood of errors, it is advisable that you inform all your team leaders, line managers and supervisors of a designated day per week for the submission of all leave forms or requests which they have received, as this helps you to stay on top of leave allocations and calculations at all times.

It is also advisable that you ensure that you conduct a leave audit at least twice per year to ensure that all leave that has been taken by employees, has indeed been captured on your payroll and HR systems.

Remember that ‘leave’ translates into monetary value and poses a financial risk to your business. Keeping leave records and calculations up to date not only makes administration simpler, it also reduces your risk exposure.

Deborah Hartung
Deborah Hartung has almost 15 years’ experience in Human Resources and Labour Relations management and has consulted across various industries. Visit the Hartung website or the HR Guru site should you require assistance with any matters relating to HR or Labour Law within your organisation, or should you wish to improve your knowledge through attending informative training sessions and workshops.
  • Trevor Luyt

    “You are legally required to inform employees how much annual leave they have due to them and the easiest way to do this is on their payslips”

    Is this really so? Where in the BCEA does it say this? – I can’t find reference anywhere.

    • The legal requirement and practice that has evolved over the past ten years is around always providing employees with correct and up-to-date information around their salaries, their annual leave entitlements and their benefits.

      The easiest way to do this is on their monthly payslips. With pension funds etc, there is usually an annual benefit statement that is sent to employees.

      The BCEA does not specifically state that the leave information needs to be on an employee’s payslip.

      Administratively, you also make your HR or payroll person’s life a lot simpler, and you reduce loss of productivity due to constant queries from staff on how many leave days they have or how much leave they can take at any given time.

      It is advisable that you provide all line managers and supervisors with a monthly leave recon for employees in their team, showing annual leave, sick leave, maternity and family responsibility leave info per employee. Doing this makes it a lot easier to pick up on disturbing trends, patterns of absenteeism or possible abuse of sick leave, so that the matter may be addressed timeously.

      Most payroll systems have very easy-to-use leave modules and automatically include annual leave info on employee payslips. These systems also make it easy to perform leave recons, extract reports and track trends.

  • tclark

    I cant see how the annual calculation iro working days comes to 21.67 days per month. For 2013-2016, there are 250, 250, 251 and 251 working days respectively (5 day working week, remove public holidays). Tthis translates to 20.88 days per month over the past 4 years.. so calculating leave pay using 21.67 essentially deprives the employee of 0.79 days per month.. Might not seem like much, but can be significant when encashing lots of leave days.. As to the “take leave and be taxed normally, but encash leave and get nailed at 40%” is another unfair matter as far as I am concerned..

  • Xander Collen

    Good day,

    Do you perhaps have one with all the South African Holidays?