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Labour Complexity

Calculating Annual Leave

Annual leave calculations: getting it right every time.

Deborah Hartung




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.

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  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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Keys To Simplify Payroll Compliance

Human resources departments across the country cite compliance as one of the top challenges they face. As an SME owner, it’s up to you to ensure that your company’s personnel business practices adhere to the current laws.






Keeping accurate records to document your company’s compliance is just the beginning, says Ania Strydom, Compliance Specialist at Sage. 

1. Why is payroll compliance so important?

Payroll is the biggest expense for most employers. Employers must comply with all labour and tax laws that govern the payroll to avoid financial and legal risks and to protect the employees and the business. The risks of getting it wrong include:

  • Censure
  • Interest or fines by authorities
  • Imprisonment in cases of fraud or extreme negligence.

Payroll fraud is one of the most common white-collar crimes in the business world; what’s more, inaccurate payments and non-compliance can cost a business dearly.

Related: How To Get The Most From Your Payroll Solution With The Sage Academy

2. What are the implications for staff if a company is non-compliant?

non-compliant-companyThe payroll is one of the most crucial links in the employee-employer relationship. Late or inaccurate wage and salary payments, or inaccurate calculations of other earnings (such as overtime), deductions (such as PAYE and UIF), and contributions (such as retirement fund or UIF contributions) can be extremely damaging to the morale of the workforce.

By law, every employee is entitled to a payslip and tax certificate (IRP5/IT3(a)). Employees need payslips for purposes such as applying for personal or home loans. Accurate and easy to understand payslips will boost employee satisfaction and trust in the company, with a positive impact on business performance.

What’s more, employers must make sure UIF contributions are correct so that employees get the full amount they are entitled to if they need to claim.

3. How will the company’s growth prospects be affected if the company is non-compliant?

While an efficient payroll system enhances staff morale and boosts an organisation’s reputation, mistakes in record-keeping and compliance can result in punitive penalties and hurt the company’s brand. Compliance mistakes with payroll can be expensive and potentially catastrophic which subsequently results in business risks.

Related: How Do I Go About Valuing My Business?

4. How can a business ensure it is payroll compliant?

South African tax regulations and labour laws are and continue to be more complex. Keeping track of all the payroll legislative requirements can be challenging, but the risks of non-compliance are high and businesses can no longer rely on spreadsheets and other manual methods to do their calculations, report and file returns.

Automated solutions are becoming more essential for keeping reliable records, reporting and performing accurate payroll calculations.

The package you choose should:

  • Be tailored for the local tax law, labour law and regulatory environment
  • Manage all the complex calculations and regulatory reporting the business must do timeously
  • Feature automated updates to ensure the company always processes on the latest software and legislative version.

This will ensure it avoids censure, fines, penalties, interest and/or imprisonment as a result of non-compliance.

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Why Your Employees’ Health Is Your SME’s Wealth

Absenteeism costs R16 billion annually, according to Stats SA. That’s a lot more than it costs to sign up for a group offering that is specifically designed for small to medium enterprises.





Vital Stats

Fedhealth’s Commercial Executive, Michelle Morton explains the importance of group health cover to keep your SME’s pulse strong.

1. Why is it important for a SME to care about the health of its employees?

First, when an employee in a critical role within the SME falls ill, there’s often nobody else to fill the skills void created by his or her absence. This can have a detrimental effect on the daily operations and business output.

Second, offering sound medical aid may attract and retain the right talent to the business.

Third, choosing a medical aid like Fedhealth, which places a big emphasis on preventative health and wellness, can also assist the SME owner in cultivating a healthy culture in the workplace.

Related: Fedhealth Brings Healthy Benefits to your Staff

2. What should business owners consider when looking for a group medical plan?

Apart from factors like affordability, a good reputation, and ability to pay claims, look for schemes that offer value-added services, such as wellness days where staff can undergo crucial health screenings, and programmes to address specific health issues.

3. What are the top health concerns for today’s workforce?

Back and neck pain are second to headaches when it comes to painful conditions affecting humans — especially office workers, who are often desk-bound for hours on end. Fedhealth offers qualifying members a 12-week Conservative Back and Neck Rehabilitation programme to help correct the problem through exercise and behaviour.

Diabetes and hypertension are also on the rise, while some employees face HIV/Aids, weight issues or struggle to quit smoking. Fedhealth provides assistance for all these diseases and health concerns.

4. How will the employees benefit from working for a company with a great group medical plan?

I believe it makes the business a more attractive place of work for employees, as medical aid is a much-needed benefit and costly if one has to pay for it out of one’s own pocket.

Related: Why Fedhealth Believes In The Power Of The SMME Sector

5. Please explain the importance of the SOS Corporate Wellness benefit

The Sisters-on-Site service (SOS Corporate Wellness) is a value-add as it brings basic healthcare to the office. This means that staff can regularly see a qualified nursing sister at their place of work for minor health issues, instead of having to take time off work to visit the doctor or clinic.

Employees build a rapport with the sister, as they see her on a frequent basis. Through the SOS Corporate Wellness benefit, they can also conduct important health screenings that might flag serious health issues of which the employees might be unaware. Sisters-on-Site can also facilitate monthly health themes to raise employee awareness on issues like breast cancer.


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Why HR Legislation Compliance Can Curb Business Failure

Don’t let your business reputation get dented due to non-compliance.



HR Legislation Compliance

HR Legislation Compliance

Vital Stats

Millennium Support Services is designed to afford all business enterprises the opportunity to have Human Capital Management for their business.

“It is just unfortunate that non-compliance is exactly that “non-compliance” and most small businesses reputation gets dented or even fully destroyed, in the event that they are being accused of non-compliance by employees and statutory bodies” says Sharon Tshabalala CEO of MSS.

“Small businesses have no resources yet at the same time are not exempted from compliance. So, through the use of technology we are able to provide easily accessible HR services across the board.”

Related: Human Resources Management Demystified

Millennium Support Services provides businesses with exclusive distinctions of its service, so that you can ensure that your business remains compliant.

Human Resource Policies


The advantage it has over other online HRM systems is that it offers online access to Human Resource policies based on approved legislative framework.

1Independent Representation

In cases where disciplinary proceedings have to be under taken, an independent chairperson will be made available. When disputes have been escalated to the CCMA, a Labour Relations Expert will represent the employer.

2Disciplinary Policy

The primary purpose of discipline is to encourage employees to correct their conduct and/or discourage employees from breaching standards of conduct. Depending on the nature of the breach, there are five forms of disciplinary sanctions taken against employees – either formal or informal.

Namely: Verbal Warning, Written Warning, Final Written Warning, Suspension of Salary and finally Dismissal.

3Grievance Policy

The purpose of this policy is to give guidance and to provide a framework on how to raise and deal with grievances effectively at the earliest possible stage. There are three types of Grievance which have an informal/formal procedure.

Namely: Mild Grievance, Serious Grievance and Sensitive Grievance.

Related: Is Leveraging Your Resources Getting The Job Done Properly?

4Occupational Help Policy

The purpose of this policy is to establish minimum standards and requirements of occupational health and safety for the corporation in order to reduce the risk by:

  • Identifying hazards and possible risks causing incidents and accidents,
  • Setting standards of practice, procedures and accountability,
  • Measuring performance against standards, Evaluating compliance with standards,
  • Correcting deficiencies, deviations, and set standards of procedures to be followed,
  • Creating and maintaining a healthy and a safe work environment.

HR management is a specialist field, with many laws and regulations to navigate. If you don’t have a background in this field and can’t afford to hire a full-time HR specialist, consider outsourcing this function.

Millennium Support Services – Human Capital Management made easy.

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