When an employee finishes employment, there are some situations where the employer and employee may agree they won't work out their notice period. In these cases, the employer still needs to pay the employee for the time they would have worked. This is commonly known as garden leave.
If you'd like to pay an employee for garden leave in PayHero, make sure you've finished paying the employee for any regular pays that won't contain any garden leave, then follow the three steps below.
1. Creating Garden Leave
First, you'll need to create a new pay item for processing garden leave. Under Manage > Pay Items, create a new 'Other Earnings' pay item and give it your preferred name.
If you'll be using garden leave for salaried employees, make sure you set the 'Salary Timesheet Hours' setting to Replaces Salary.
2. Adding Garden Leave to the Employee
Add your new pay item to the Employee's Default Pay tab. This is found within the employee record under Manage > Employees.
Set the Quantity to the total hours your employee receives each pay.
3. Paying Garden Leave
Employees on garden leave should continue to be included in the regular pay cycle like normal for the duration of their notice period.
In each pay, the hours specified in their Default Pay from step 2 will automatically populate, and their salary will be reduced to $0 (if applicable).
When the last pay for the notice period is processed, it should also be set as the employee's Final Pay. You can set the employee's finish date in their employee record in advance if you'd like PayHero to create the final pay automatically when the time comes. Learn more here: Finishing an Employee
Frequently Asked Questions
When can I use garden leave?
You can learn more about when you can apply garden leave from MBIE here: Garden Leave
What should the Work Days be set to?
The Work Days on each pay should reflect the total days you're paying the employee for, even though they aren't working. You can learn more here: What are Work Days?
What if the notice period starts in the middle of a pay period?
The steps detailed above still apply, but you'll also need to add some garden leave hours to their last 'normal' pay to top them up for that period.
Similarly, the last pay covering their garden leave will need to have the hours reduced to account for their notice period ending part way through that period.
For example, an employee might have:
- A pay containing 32 hours of normal hours and then 8 hours of garden leave.
- Three pays each containing 40 hours of garden leave.
- A last pay containing 8 hours of garden leave (this would also be their Final Pay).
What if I want to pay the employee out at the start of the notice period?
If you'd prefer to pay the entire period of garden leave at the start of the notice period, you can do so using a One Off Pay. Make sure the pay period matches the period of garden leave - for example, if you're paying the employee for a 4 week notice period, ensure the One Off Pay is exactly 4 weeks, and starts immediately after their last normal pay.
Make sure you also set this as their Final Pay, to finish the employee.
In this case, you should also remove the employee from the Pay Cycle under Manage > Pay Cycles, to ensure they won't be included in any further pays between now and their finish date.