If an employee has been on a Holiday Pay As You Go contract and is changing to permanent employment, there are a few settings to get right.
Once their work pattern is set, the best approach to take will depend on what type of casual employee they were.
Click into the Fixed Term Contract or Intermittent or Irregular sections below for more info on any additional steps that may be required, depending on the reason for their HPAYG contract.
If they were on a fixed term contract and change to permanent employment, the law is as follows:
Section 28 (3)
If the fixed-term agreement of an employee to whom subsection (1)(a)(i) applies is followed by permanent employment with the same employer, the employee -
(a) becomes entitled to paid annual holidays at the end of 12 months’ continuous employment (including the period of that fixed-term agreement) under section 16; but
(b) the amount of the holiday pay that the employee is entitled to be paid for the holidays is reduced by the amount that the employee has already received under subsection (1).
In PayHero, this situation is handled automatically if you simply untick 'Pay As You Go'. Because the next anniversary date isn't changed, it is necessary for the employee to have the value of their leave reduced by the amount of Holiday Pay they have already received, so that when they pass their anniversary and receive 4 weeks leave they aren't doubling up.
A separate balance is shown on the employee record under the Leave tab for Holidays Paid Out:
The reduction of the Holiday Pay received happens in PayHero when the employee takes Annual Leave. The Annual Leave is paid out as normal but an additional deduction pay line is added to the pay called "Holiday Pay in Advance - Holidays Already Paid" -
After the pay is sent, the balance of Holidays Paid Out on the employee record will be reduced by the amount deducted in the employee pay. Once the balance of Holidays Paid Out reaches $0, the employee will be paid normally for leave.
What if I want to take a different approach?
When it comes to exactly how to administer reducing the pay for annual holidays the employee becomes entitled to, page 49 of this guidance document from MBIE notes:
The Act does not specify how this last point is to happen, so it will be necessary for both parties to agree this. For example, they could agree that the employee receives no (or reduced) holiday pay when they take annual holidays until the amount already paid is reached.
The example described by MBIE is the approach PayHero takes, but if you and the employee wish to agree on a different method for reducing the value of their Annual Leave by the amount of Holiday Pay they've been paid in advance, that's up to you.
Any changes you agree to can be applied in the employee's Leave tab, and the Holidays Paid Out value can be set to $0 once you have made the appropriate reductions.
If the employee hours were intermittent or irregular, but are now changing to regular hours, the approach described above for Fixed Term Contracts can also be applied. This simply takes them off Holiday Pay As You Go, and recoups their Holidays Already Paid when they take leave.
Alternatively, it's common for employers and employees to agree that the employee is effectively ending their previous contract, and beginning employment under a new agreement. If this applies, we recommend you finish and restart the employee. Use the Finish Employment button on the Employment tab:
Once you've entered the date of the change over, use the New Employment button to restart them:
Note that this will clear sick leave and alternative leave balances, so these may need to be re-entered. If the employee was eligible for sick leave while they were on intermittent hours, the sick leave anniversary may need to be reset to 6 months since their initial employment.