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Labour Complexity

Calculating Annual Leave

Annual leave calculations: getting it right every time.

Deborah Hartung

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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 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.

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4 Comments

4 Comments

  1. Trevor Luyt

    Dec 8, 2011 at 08:00

    “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.

    • Entrepreneur

      Dec 9, 2011 at 08:05

      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.

  2. tclark

    Sep 18, 2015 at 14:42

    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..

  3. Xander Collen

    Mar 23, 2016 at 16:41

    Good day,

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

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Labour Complexity

Why Employees Need Funeral Cover

Why your employees need funeral cover – the macabre topic you didn’t think you needed to discuss.

Amy Galbraith

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Being the boss is difficult. You need to be sure that your company is running smoothly, keep customers happy and ensure that your employees are satisfied and content. One effective way to keep your employees satisfied is to offer them benefits such as a medical aid, life insurance or funeral cover.

Group scheme funeral cover is especially important to employees as the costs of funerals continue to rise. If you are interested in offering this to your employees, read on below for just some of the reasons why your employees need funeral cover.

The cost of a funeral

If you have not planned a funeral recently, then you will not be aware of how costly they can become. Even if you water it down to the basics, a funeral is an expensive endeavour. Often you will see people struggling to put together the funds to pay for a funeral of a loved one, which could be the case for one of your employees.

Sometimes, employees will put finances together for their coworker, so the family can use these funds towards the funeral. This is especially true if the employee was the sole breadwinner of their family. Getting funeral cover for your employees will alleviate this burden and allow their friends and families to grieve in peace.

Related: Sick and Tired of Employees being Sick and Tired?

There are fewer exclusions

There are usually exclusions for funeral cover but, for group scheme funeral cover, there are significantly fewer. In some cases, your employees do not have to undergo a medical exam and if they are smokers, they will not have to pay a higher premium than the other employees.

Unlike individual funeral cover, group scheme funeral cover works on the principle of pooled risk, it is available to all employees regardless of their health status. If one of your employees has high cholesterol, they will not be excluded from the cover. Similarly, if someone has diabetes, they will not be excluded. This is a fantastic aspect if your employee is the sole person who works in their family and does not have the means to afford their own cover.

Benefits apply automatically to all employees

One of the major reasons why group scheme funeral cover is so good for your employees is that the benefits will apply immediately to all employees. This means that, regardless of their health, age and level in the company, they will have access to the benefits.

This is highly advantageous to your employees as they will not have to wait to see if they qualify for the cover. While there might be a certain time period you will have to wait before making a claim, your employees will all reap the benefits equally. This makes for a happier workplace and less stressed employees, which benefits everyone.

Their families will have closure

If or when one of your employees passes away, it is a very difficult time for their family. This can be made even more difficult if they have to scrape together money to pay for a funeral. Having a proper, dignified funeral is part of the grieving process and provides closure for the family.

If their family is not able to plan a proper funeral, this could mean that they have an open-ended period of loss in front of them, with no official goodbye to their loved one. You will also find that fellow employees find closure, as they will be able to attend the funeral and give their condolences to the family. Having closure is an important part of the grieving process and will ensure everyone involved can grieve properly.

Related: Why Innovative Employee Benefits Are Your Competitive Advantage

It offers a good incentive

If you want to find and retain talent, you will need to offer your employees a good incentive to choose to stay with your company. Group scheme funeral cover might seem like a minimal benefit, but your employees will be happy with the fact that you are actively helping them to look out for the best interests of their family.

Having funeral cover will make it more likely that your employees will stay loyal to you, as you are offering something that will help with their future and the future of their family. While some employees might have taken out their own cover, there are some who might not be able to afford it. Your employees will feel valued and appreciated and will stay with your company rather than look for work elsewhere.

Final words

Your employees need funeral cover for a wide variety of reasons, one of which is the rising cost of funerals in South Africa. There are fewer exclusions with group scheme funeral cover, which means that all of your employees will be covered, no matter what their health status is.

Some options even allow employee family members to be covered, which can be of immense help to the employees in their time of need. Offering funeral cover to your employees is affordable and allows them to have one less stress in their lives, which means more productive workers and a happier office atmosphere.

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Company Posts

Temporary Employment Service Providers Underpin IPP Economic Development Goals

Preference will be given to Independent Power Producer projects valued at R56 billion that possess a plant technology and location that contributes to local economic development.

Workforce Staffing

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“Independent Power Producer (IPP) projects will provide 61 600 full-time jobs,” stated Energy Minister, Jeff Radebe, while announcing the plan for 27 new renewable energy plant projects to be rolled out under the IPP programme.

This is an excellent and beneficial initiative. However, the fact that many of the skills will be required only on a temporary or project basis during the construction and setting up of each facility, may pose a challenge for IPPs looking to get started.

Skills sourcing

Sean Momberg, Managing Director of Workforce Staffing, says that IPP projects stand to benefit from consulting experienced Temporary Employment Service (TES) providers. “IPP projects require a significant investment in human capital, which becomes more complex and time-consuming by having to source local staff,” he explains.

Related: Temporary Employment Providers — Friend or Foe?

“Once the main contractor is appointed, they are responsible for sourcing skilled staff and suppliers for the duration of the construction and commissioning phases. A TES provider can significantly reduce the workload, by managing all human resources and industrial relations for them.”

Building an alternative power plant is a lengthy process. The 27 projects mentioned have spent approximately two years in this sign-off period and, now that they have been approved, IPPs need to work quickly to get the ball rolling. From civil work and environmental impact assessments, to mechanical, engineering, electrical and physical site building — each project requires a varied and vast number of skills.

Running interference

“TES providers go beyond providing temporary and project-based staff,” says Tebogo Moalusi, National IR Director at Workforce Staffing. With unions such as NUMSA protesting against IPP projects, even though job losses due to coal mine closures were unrelated to the introduction of IPPs, TES providers’ expertise in managing union relationships can prove a valuable aid to IPPs.

“IPP projects commonly face hinderances like demarcation disputes,” adds Tebogo. “A reputable TES provider understands local economic development as well as relationship management and works with both local employment providers, the community and unions to mitigate concerns.”

IPP projects often involve investment from international players and communication between international and local parties. Sean says that TES providers assist in breaking down these communication barriers, focusing on the importance of local job creation, while ensuring that international standards are maintained.

 “TES providers assess local catchment areas keeping fair processes in mind. This takes procurement into account, and sourcing of local equipment, accommodation, transport and catering is all considered,” he says.

Frequently with international parties, payment terms are set at 90 days from invoice. Sean stresses that this is not sustainable in local environments, where suppliers and staff don’t have the financial capacity to work within those terms. A reputable TES provider has the financial capacity to ensure that payment demands are met weekly or monthly, based on local requirements.

Related: Does A Strike Hit The Heart Of Your Business?

A focused approach

“A TES provider’s focus remains employment. Although the IPP’s goal is to complete their project on time and within budget, TES providers have the experience and knowledge to provide employment and procurement solutions that underpin the IPP’s objectives, ensuring a smooth and hassle-free project roll out,” Sean concludes. n

Temporary Employment Services’ part in minimising IPP job losses

  1. Onsite training and skills courses upskill temporary project workers.
  2. Skills transfer helps ensure future employability.
  3. Entrepreneurial skills development fostered for post-project maintenance contract work.

Workers obtain marketable skills they can add to their CV.

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Company Posts

Is Your Critical Illness Cover Keeping Up With The Times?

Critical illness cover was originally the brainchild of a forward-thinking surgeon who noticed more and more patients were struggling to make ends meet after recovering from life-threatening conditions.

BrightRock

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Critical illness cover was originally the brainchild of a forward-thinking surgeon who noticed more and more patients were struggling to make ends meet after recovering from life-threatening conditions. This increase was driven by medical advances, which drove a spike in survival rates – and its consequential recovery costs – something that old school insurance policies did not factor into their products. And while we all know the medical field continues to move forward through innovation, it’s important to ask yourself: has your cover kept up?

Medical advances during the 1960s and 70s didn’t just lead to an increase in patients’ life expectancies, but it also led to financial difficulties for many survivors of critical illnesses and –injuries. Many of these patients were faced with rehabilitation costs and additional expenses caused by lifestyle and/or professional adjustments they had to make to stay on the road to recovery, and they struggled to make ends meet.

Dr Marius Barnard, brother of the famous Dr Christiaan Barnard and respected surgeon in his own right, identified an opportunity to provide these patients with risk cover for these needs. He partnered with a life insurer in 1983, and critical illness cover was born.

Initially covering only four major conditions, medical advances soon enabled the expansion of critical illness cover to many more conditions, like Alzheimer’s or Parkinson’s disease, paraplegia, major burns and brain damage. Lifestyle factors such as smoking, obesity and lack of exercise have increased the likelihood of critical illness claims, but the claims are becoming less severe, thanks to improved medical techniques for the treatment and detection of life-threatening conditions.

Related: How BrightRock Is Rocking The (Industry) Boat In Only 5 Years Since Launch

Where does critical illness fit into your financial plan?

While medical and, possibly, gap cover can make provision for medical expenses, critical illness cover is instrumental in covering any gaps and providing for lifestyle changes that result from conditions like paraplegia, like the expenses involving alterations to a home to be wheelchair-friendly.

Many medical aid schemes may also exclude certain treatments or not cover them in full, or you might have reached your annual limit. In these instances, critical illness cover may just come to the rescue.

Considering all the scenarios where critical illness products have the potential to come into play, it’s important to ask yourself how forward-thinking the insurance you signed up for really is. Does your insurer factor in the latest treatments, and have they adjusted the range of conditions they provide cover for to keep up with the latest medical research and survival rates?

How many conditions are covered?

Start by obtaining the list of conditions covered by your critical illness policy, because the number of conditions covered vary from company to company. There are life insurance providers that provide cover for over 300 conditions, while some assurers cover fewer than 100 conditions. Some life cover providers also take into account the treatment, clinical impact and effect of an illness, which ensures protection for as yet undiagnosed conditions – this is the kind of cover you should be signing up for.

How do the pay-outs work?

You should also consider the pay-out structure and/or –options of your critical illness policy. There are policies with pay-out options that are helpful for conditions that involve large expenses initially, followed by smaller amounts over a number of months. Importantly, you should be allowed to make certain choices about how your cover should pay out at claim stage, when you know what your physical and financial needs are.

What about smaller events, like accidents?

Forward thinking life cover providers have also identified a need for financial protection in instances where you might have less critical, but still traumatic illnesses or injuries and spent little or no time in hospital.

Related: BrightRock’s 5 Entrepreneurial Tips For Start-ups

Just think about the myriad of costs involving corrective procedures, medical aid co-pays, hospital costs, rehabilitation, assistive devices, physiotherapy, wound care, nursing and surgery costs – not to mention being unable to earn an income while you recover from a serious illness or injury. Many of these expenses might be typically incurred just because you aren’t fully covered by medical aid schemes and gap cover products.

Innovations like cover that precisely matches your needs are done in the same spirit of innovation and matching the needs of patients as we saw with Dr Marius Barnard. So before signing up for, or selling your next critical illness policy, ask yourself: Does my cover provider do the same?

  • Schalk Malan is the CEO of BrightRock, provider of the first ever needs-matched life insurance that changes as your life changes.

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