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Community > AU Payroll >

AU Payroll: Correct leave accrual or leave taken but not both

Started by Sash Vasilevski -   in AU Payroll

I have what I think is a simple requirement of payroll, with regards to leave. This is for full-time employees, working 38hrs / week, 20 days annual leave / year. Standard stuff I would think.

* Every day they work, they accrue leave

(7.6hr per day x 20 days leave per year = 152 hours leave per year. Divided by 260 weekdays in a year = 0.584... hours of leave accrued per day worked.

* Every day they take leave, their leave balance is reduced by 7.6hrs hours.

Annual leave in Settings > Payroll Settings > Pay Items > Leave is set to 152 hours.

In the employee pay template, I've tried "Calculate Rate - Fixed Amount Each Period" and "Calculate Rate - Based on Ordinary Earnings". If I choose one, accrual may work as expected but not taking leave. If I choose the other, leave subtracts the appropriate amount, but accrual is not correct.

My view is that an employee should accrue based on how much they are working. I.e. they should accrue less leave in a 28 day month like Feb than in a 31 day month like Mar. This is especially evident when an employee starts mid-month, where the "x hours per month accrual" technique results in too much accrual.

I don't see how this is such an issue since it seems like such a basic requirement. My other option is to ditch Xero payroll and either use Keypay and Xero or the Keypay integration with Quickbooks Online. If this much work is required just to calculate leave, the advantages of Xero diminish quite quickly compared to our previous spreadsheet approach.

Thanks for any guidance or assistance. Hopefully it's me not the product who is a little broken :)
Xero adjusts to ensure that over the whole year the leave accrued is 152 hours for a full time employee regardless of how many days are in a month. Their leave also accrues while they are on leave. For 152 hours they should accrue 2.9230 hours a week (52 weeks). The only time leave does not accrue is on unpaid leave.

Joy Moore  

Thanks for your reply Joy.

152 hours per year for a full time employee = 12.6667 per month accrual. I created a leave entry for 2 weeks unpaid leave in Feb. I then created a draft pay run.

Result: 12.6667 hours of annual leave accrued. Pay is reduced to reflect the unpaid leave just not leave accrual.

The pay template has annual leave set to "Calculate Rate - Fixed Amount Each Period". Not sure what else it could be.

Sash Vasilevski  

Hey Sash - I can see that you’ve been in touch with Support about the ours that calculate in the leave application. For monthly employees, this will be based on the leave accruals in the pay template and the number of business days in a month.
If the leave accruals are set to calculate at a fixed amount each pay period, the number of hours of leave will be the same every pay period. In this case 12.6667 hours. If you need the hours to automatically reduce when unpaid leave is taken, you’ll need to set them up to calculate based on ordinary earnings instead. If you’d like more info on the leave accruals in the pay template, check out the details in the Help Centre here.

Quenby S (Community Manager)  

Hi Quenby,

Thanks for your reply. I follow your post through to calculation based on ordinary earnings, which seems like the most appropriate mechanism for leave accrual. However, a new problem occurs in this mode, with leave requests resulting in incorrect leave calculation.
E.g. 1 day leave in Feb deducts 8.23h. 1 day leave in March results in 7.48h.
I can't see how many, many small businesses aren't in the same situation.

My previous support case came with the response "manually adjust the number of hours to reflect what you would like processed".
Hardly helpful when Xero is supposed to automate these calculations.

Sash Vasilevski  

Hey Sash - It looks like you’ve received a response about this from our Support team. If you need any more help, just let us know or get back in touch with Support.

Quenby S (Community Manager)  

Merged: AU Payroll - Leave accruals for twice monthly pays

How can I set up leave accruals for full time employees on a twice monthly pay run but their hours vary each pay run? I can't add anything where the add Xero asks how many hours in a twice monthly pay period.
1. The amount of hours will change each period due to the number of working days in the pay period. Our employees submit time sheets for 1-15 and 16-end of month. Therefore the working days will change.
2. The employees do not work a standard working week e.g 38 hours a week. They may work 8 hours one day and 4 hours another day.
3. They are classified as full time employees.

Is this possible to be set up for Xero to calculate on 152 hours leave accrual for each year on ordinary hours? I have been adding the accruals manually and I have been told to streamline the process and nothing is to be added manually.

Michelle Thompson  

When you set up the leave accruals in their pay templates you can select 'calculate rate based on ordinary earnings'.

On 38 hours the annual leave accrued each year is 152 hours. Hours in a twice monthly pay period I know does change a little but if you calculate 38 hours a week x 52 weeks in a year divided by 24 pay periods in a year you will get 82.33 hours in a twice monthly pay period.

Then Xero will calculate their accrual based on the hours that they earn in a pay period but will not take it over the maximum allowed to be accrued in a year eg 152 hours.

Try it for a few pay runs and see if that produces the same calculation as you would have done manually.


Joy Moore  

You can set up the set hours in their pay template, so no matter what hours they work each pay, Xero will calculate what you have set in.

Denise Twigger  

Hi Michelle - The recommended calculation type for leave accruals is ‘Based on ordinary earnings’, as Joy suggested. This option will calculate pro rata accruals based on the number of hours the employee works in a pay period. However, its up to you to decide what is going to work best for your business.

Quenby S (Community Manager)  


I have the same problem as Sash and was wondering what the outcome was?
It seems to me that leave accrual needs to be based on ordinary earnings so that it changes depending on the working days in a monthThat makes sense.
However I cannot understand why anyone would want leave deductions to follow that calculated method, when it should simply be deducted by the number of hours/days in the leave request (7.6 hours per day for example).

I would also like to know what 'Hours in a Monthly pay period' actually does when configuring leave accruals for an employee, and how this field should be calculated, as it doesn't seem to affect any calculations.


Tom Allan  


I'm still having issues with this.

In the most simplest form, my employee has taken a week of unpaid annual leave that should result in 0 hours accrual, but it's coming up the default ~3 hours accrued. She's then taking 2 days per week unpaid for a month and the other 3 days normal pay. I've entered these dates in as Unpaid Leave but the Annual Leave still accrues at a full ~3 hours per week where it should be reduced.

How can i set up Xero so she accrues Annual Leave based on hours worked.

The above steps must be out of date ... either that or i'm just plain stupid?!

Please provide exact location of area to edit to make this happen.



Neil Duckett  

@Tom - The 'Hours in a Monthly pay period' will determine the amount that accrues each pay period, based on hours worked. It's also used in the calculation of the pre-populated hours in leave requests. For a monthly employee who works 38 hours per week, this field would be 164.67 (38 x 52 / 12).
@Neil - It sounds like these leave accruals are set up to be a fixed amount per pay period. If this method is used, the accruals won't reduce when unpaid leave is processed. The recommended calculation method is 'Based on Ordinary Hours'. This way, they'll take into account unpaid leave, as well as employees who are part time.

Quenby S (Community Manager)  

Thanks @Quenby - as hard as i try i can't find where to change this setting? The Leave settings are "locked" and don't have an option to change the calculation method. Please get back to me ASAP, i need to change this now.

Neil Duckett  


Yes understood. But an employee who works 38 hours per week would be taking 7.6 hours per day of leave, not 164.67 / number of days in the month. It works for leave accrual, but not for leave deductions, meaning I have to manually override any leave entries to ensure they are deducting 7.6 hours x number of leave days requested.

Tom Allan  

@Tom That's exactly my original issue..

Sash Vasilevski  

@Neil - This isn't done in the Payroll Settings, rather, its done per employee. Head over to Payroll > Employees > select employee > Leave tab > click on the balance of a leave type to manage the settings.
@Tom and Sash - Yes, regardless of the accrual settings, the hours in a leave request for monthly employees will still be based on the number of business days in a month, and the number of hours worked per month (ie, 164.67). We're aware of this, but its not going to be looked at in the short term at this stage. In the meantime, please continue to edit these hours manually before processing in pay runs.

Quenby S (Community Manager)  

Merged: AU Payroll - Calculate Leave Per Day for Monthly Employees on an Average Basis

Currently, if an employee is assigned to a monthly pay calendar, the system will calculate the number of hours per day in a leave application by dividing the number of business days within the calendar period by the number of ordinary hours set per pay period within the Pay template.

For average month salaried employees this means that every time a leave application is entered, they have to adjust the calculated hours per day as it each month it varies and is not an even 7.6 hours per day for a 38 hour work week.

Would be great if these employees with monthly pay and salaries, could just have leave request hours calculated based on the number of days per year accrued divided by the average days per month.

i.e. 260 work days per year = 21.6667 days per month = 164.6667 hours per month.

This equates to an leave application of 1 day being calculated as 164.6667/21.6667 = 7.6 hours.

Brendan Marshall  

I have employees on a bi-monthly pay calendar and it automatically calculates the day leave at 7.5 as they work as 37.5 hour week.

When you allocate leave to the employee select fixed amount each period. Then enter the hours accrued annually in your case 152 hours and it will calculate how much should accrue on each pay run eg 12.6666 hours per month.

Joy Moore  

Mmmm, I have set it up both ways and it gives me the correct accrual, but it is when applying for the leave that it uses this days in the month formula which means the application hours vary slightly from the 7.6 per day depending on the number of days in the month.

It becomes 164.6667 / "Days in the Month", i.e. 164.6667 / 22 = 7.4849 etc.

Brendan Marshall  

It shouldn't. Without looking at your Xero is it hard to identify what the problem could be. You might need to log a support call with Xero and tick the box to give them access to your account so they can help you.

Joy Moore  

I have the same issue, the accrual is correct at 7,6 but the leave taken is being calculated on 7.4849 and I can't see where this can be changed. It needs to be the same! We have always used a 7.6 hours day and do not really want to have to change this. Feedback please.

Kelly Randle  

Hey Team - Yes, with monthly employees, the system will divide the number of hours in a monthly pay period (from leave accrual setting) by the number of business days in that month.
So, it won't be 7.6, regardless of what has been set up as this employee's weekly hours. We've had other requests to change this and we will look at it going forward, but for now, you'll need to manually change the hours in the leave request before processing.

Quenby S (Community Manager)  

thanks for that, we are changing it for now so look forward to a future update. :)

Brendan Marshall  

I have an employee who works 38 hours per fortnight. all leave is based on Ordinary Hours. There are two different Ordinary Hours pay items in this employee payslip, for operative reasons.
Leave accrual per fortnight should be 2.92296 hours
On one fortnight the Ordinary Hours worked were 31 hours and there was an "unpaid leave' item included for 7 hours.
Xero is calculating only 1.3846 leave hours for 31 hours worked when it should be 2.3846.
Could you please tell me how is Xero calculating this accrual?
I need this information asap please.
Thank you

Flavia Leser  

Hey Flavia - If leave is set up to be 'Based on Ordinary Earnings', it won't accrue on unpaid leave types. The system will calculate leave on a pro-rata basis. If there was another earnings rate being used, this needs to be set up in a certain way. For employees who have more than 1 ordinary earnings rate, the additional ones need to be set up as a 'Multiple of employee's ordinary earnings rate' in the Payroll Settings, so you can choose the option to accrue leave on these earnings.
If they haven't been set up this way, the system will only be accruing on hours assigned to the employee's Ordinary Earnings Rate in their Employment tab.

Quenby S (Community Manager)  

Hi Quenby, I managed to create another pay item and make the previous one I was using obsolete.Is not allowing me to put hours in the pay template, and it is not accruing leave in the payrun, it reverts to the obsolet pay item. It doesn't allow me to put down hours and rate per hour, which is what I need because working hours change from week to week. There is another OH item in the payrun, but when I try to do the template it still says that there needs to be an OH item.

Flavia Leser  

Hey Flavia - Before updating the earnings rate in the Pay Template, you need to update the 'Ordinary Earnings Rate' in the Employment tab. There needs to be at least one line in the Pay Template that is the same as the one in the Employment tab, and remember this will be the one that accrues leave.

Quenby S (Community Manager)  

Hi Quenby,
Thanks for your reply.
Some of our staff have more than one earning rate. How would this work.
Thank you

Flavia Leser  

Is it possible to select "Calculate Rate - Fixed Amount Each Period" for one employee and "Calculate Rate - Based on Ordinary Earnings" for other employees?

Steve Russell  

Hi, we have part-time employees on a fortnightly pay cycle and while their leave accrual correctly adapts for their ordinary hours worked, any leave applications pre-fill hours based on the hours for a full-time employee. We manually change the hours to be taken to match their working hours, but it would be better to be automatic, like the accrual. Is this something that has a systematised fix, or is there an update that will address this? Thanks.

Alan MacKinnon  

I have a similar situation where employees have different earnings rates based on the day of the week they are working. They are full time but paid hourly not as a salary. If the only way to get leave to accrue on all leave types is to set it as a multiple of ordinary earnings the multiples are pretty ridiculous - 1.11812627. Are you likely to change it to be able to set different hourly rates for different situations but be able to check the box so all rates accumulate leave?

Linton Wood  

Not quite sure I understand the question Linton. Regardless of whether they work weekend or week days if the leave type is set up to calculate on ordinary earnings then it will calculate based on the hours they worked irrelevant of what day it is or what theire rate of pay is. This is why some awards have leave loading so that when they go on leave they get paid their leave at their ordinary earnings rate (mon - fri rate) then the loading on top to help compensate those that usually work weekends, public holidays etc and incur penalty rates.

Joy Moore  

Thanks Joy. To clarify, I have been using Deputy which integrates with Xero and acts as a way of tracking staff hours (they sign in and out). You set up a pay template in Xero that has different lines for different rates (weekend, weekday etc) and then export the data from Deputy into Xero. You can only choose one of these rates to be 'ordinary hours' in the employment tab. The annual leave accruing is less than what it should be on the staff payslips so I am assuming that the leave is only accruing on the 'ordinary hours' line in the pay template, which is the weekday hours and not weekends.
Unless there's another reason that the leave is accruing incorrectly!

Linton Wood  

@Linton - There's an existing feature request for what you're after here, if you'd like to add your vote :)

Quenby S (Community Manager)  

I would love to see this fixed also. Having to change the leave hours requested each time is tedious.

Rosemary Harmata  

The best way to calculate annual leave for a mix of FT and PT employees? In Xero calculation is wrong when employees is Part time and hrs differ every week In our old system worked like this Where you have a mix of full time and part time employees, is it better to set up Payroll to calculate leave based on the number of hours that they work, instead of a set number of hours each pay?

I work out annual leave as 4 (weeks) x 38 (hrs/wk) / 52 (weeks/yr) / 38 hrs (for an hourly accrual rate). Or .0769/hr.

ATM I am doing calculation manually can anyone suggest workaround for XERO

Gopal Harne  

Leave accrual is set up in the employees leave tab for each employee so they don't all have to be the same.

If you set up the leave accrual so it is based on ordinary hours then it will Xero will calculate it for you based on the hours the employee work.

If you have full time staff that get paid monthly or bi-monthly then set your accrual to fixed hours.

Remember when setting up the accrual for part timers (eg based on ordinary hours) that the hours accrued annually field must be the hours for a full time employee. Xero will calculate the pro-rata accrual based on the hours they work.

Hope this helps.

Joy Moore  

Hi everyone, is there a way to have 2 different types of hours calculated for annual leave eg- weekday+saturday rate=+loading for each rate? Thanks for any help

Katrina Coleman  

We started using XERO 1/7/17, under each employee there doesn't seem to have been any leave accrued.
I have entered hours under 'opening balance' as these were the hours accrued prior to XERO. Can someone please let me know how often the leave accrual is calculated? The leave should be calculated based on ordinary hours (have set this template up) and also the pay template is correct.

Yass Valley Property  

We are currently doing a fortnightly payrun, which accrue 5.8462 hours per payrun. Leave calculation is set as "Based on Ordinary Earning". But when posting the payrun, accrued annual leave is posted as 75.9994, how can we fix this?


Rosshelle Mendiola  

I had this problem with Xero massively over-estimating leave entitlements about 2 years ago. I then ended up just engaging casual staff, so Xero started working fine (as they do not accrue leave entitlements). However I have just switched back to 2 part-time staff and it looks like Xero still have not fixed the problem. After one 14 day pay period, one staff member has accrued 38 hours annual leave and 38 hours sick leave, while the other had accrued about 29 hours annual leave. It looks like this basic calculation problem has still not been fixed after 2 years.

Suryan Chandrasegaran  

I would suggest lodging a support request with Xero so that they can look at how you have set up the accrual. It needs to be set up as if it is for a full time employee and based on ordinary hours and then Xero calculates the pro-rata accrual.

Joy Moore  

I agree with Joy. We have full time and part time employees. I have found there to be no issues if the information is set up correctly. When this is done properly the calculations for both accrual and leave taken are correct for all employees.

Kelly Randle