Alternative Leave, also known as time in lieu or alt days, is a type of leave granted to some employees who work on a public holiday. Alternative Leave allows them to take another day off in the future, and is granted in addition to the employee's entitlement to Time and a Half for working on the public holiday.
Check out the sections below to learn how Alternative Leave works:
- Entitlement to Alternative Leave
- Accruing Alternative Leave
- Alternative Leave Balances
- Requesting Alternative Leave
- Paying Alternative Leave
- Frequently Asked Questions
To receive Alternative Leave, an employee needs to work on a public holiday, and that day must be an Otherwise Working Day (OWD) for them. An OWD is a day the employee would usually work.
For example, if an employee normally works on Mondays and works on a public holiday which falls on a Monday, they would receive Time and a Half and an Alternative Leave day.
By comparison, if an employee doesn't normally work Mondays but offers to cover someone else's shift falling on a Monday, by default they would receive Time and a Half only.
You can learn more about OWDs and how they're calculated in PayHero here: Otherwise Working Days
When it comes to accruing Alternative Leave, PayHero can do most of the heavy lifting for you. To enable these calculations, simply ensure you have the 'Automate Public Holidays' setting enabled in your Company Settings, and that your Employees' Work Patterns are set correctly.
When employees work on a public holiday, ensure the hours worked are recorded in the employee's timesheets, then create the draft pay.
When determining whether the day was an OWD, PayHero will use the rules detailed here: Otherwise Working Days and the Alternative Leave Accrued pay line will appear in their pay:
You can download the Public Holiday Audit Report to view the entitlements calculated for each employee. The 'Alternative Day Accrued' column will be marked 'Yes' for any employees PayHero is accruing an Alternative Leave day for.
It's important to note that for employees who don't have their work days specified in their Work Pattern, the OWD rules applied by PayHero are tools to help automate as much of your public holiday processing as possible. If PayHero determines a day is not an OWD, but there was a reasonable expectation the employee would have worked that day if it hadn't been a public holiday, you'll need to override PayHero's processing.
Manually Accruing Alternative Leave
If your company doesn't use timesheets, or if PayHero determines the public holiday is not an OWD and you wish to override this, you can add Alternative Leave accruals directly into the draft pay.
When you create a pay which covers a public holiday, you'll be able to add the 'Alternative Holidays Accrued' pay item to the pay for any employee who hasn't had their entitlement automatically accrued, by clicking the button in the Leave Accrued section:
Alternative Leave balances can be viewed by navigating to the Employee's Leave tab via Manage > Employees and scrolling down to the Alternative Leave section.
To view the history of when Alternative Leave was accrued or taken, download the employee's Other Leave History Report.
Each line in this report shows a time that one of the employee's balances changed. The Action column will indicate 'Pay' for changes that occurred as the result of a pay being processed, while lines showing 'Edit' are the result of manual changes to the employee's record.
The Alternative Leave details displayed are:
Alternative Leave Days Due - The total of alternative leave days due to the employee at the time of the change. If this value changes from one line to the next, you can expect to see a corresponding Accrued or Taken value in the next two columns (unless the line is an 'Edit' line, in which case the balance was manually edited).
Alternative Leave Days Accrued - For 'Pay' actions, this is the total of alternative leave days accrued in the pay.
Alternative Leave Days Taken - For 'Pay' actions, this is the total of alternative leave days taken in the pay.
You can add Alternative Leave requests for your employees via the Leave tab. See more details on creating requests in the following article: Leave Requests.
If your employees have been invited into PayHero, they'll be able to submit their own leave requests, as seen here: Leave for Employees. These will appear in the Leave calendar to be actioned by a Team Manager or Administrator.
Alternative Leave requests will display the following details:
Requested - The total requested days of leave, based on the selected 'Start' and 'End' date of the request. This will be calculated based on the employee's normal working days. For example, if they request leave from Monday - Sunday, but only work Monday - Friday, leave will be recorded as 5 days, not 7. You can learn more about how PayHero determines the working days for different types of employees here: Otherwise Working Days.
Leave requests for a single day will always count as 1 day of leave, regardless of whether it's a normal working day for the employee. If this is not a normal work day for the employee, consider whether they should be paid for that day of leave before approving the request.
Leave Due - The employee's current total balance of Alternative Leave available. Alternative Leave usually only becomes due from working on Public Holidays, but can be added manually if desired. Ensure this balance is sufficient to cover the 'Requested' days, or that you're happy for the employee's balance to become negative if they are taking more leave than is available.
Alternative Leave is paid using Relevant Daily Pay (if known) or Average Daily Pay.
Relevant Daily Pay (RDP) - The amount the employee would have earned if they had worked that day, including any additional earnings such as commission. An employee should be paid their Relevant Daily Pay for Alternative Leave if the Relevant Daily Pay is known and their daily pay doesn't vary within the pay week. PayHero will default to this value, based on their normal hourly rate, for any employees whose Employee Work Pattern specifies their normal hours per day.
Average Daily Pay (ADP) - The daily average of an employee's earnings over the previous 52 weeks. If it's impossible or impractical to determine the Relevant Daily Pay for an employee, or if the employee’s daily pay varies within the pay period when the leave falls, the Average Daily Pay can be used instead. PayHero will default to this value for any employees for whom hours per day have not been specified in their Employee Work Pattern.
Within the draft pay, you can click the blue info icon on the pay line to see the calculation details for the rate that's currently being applied:
You can learn more about these rates, including how to switch between RDP and ADP, here: Other Leave Rates.
Frequently Asked Questions
Yes, Alternative Leave can be cashed up in some cases, as detailed by MBIE here:
If an employee doesn’t take an alternative holiday within 12 months of becoming entitled to it, the employee and employer may agree for the alternative holiday to be paid out. The payment amount must be agreed by the employer and employee, and must be made as soon as practicable once the agreement has been made.
To cash up Alternative Leave, simply add the Alternative Leave pay item to the draft pay and specify the number of days to cash up. Set the units to 'Hours' if you wish to specify the employee's Relevant Daily Pay, or 'Days' if you wish to pay their Average Daily Pay.
If an employee has unused Alternative Leave days when finishing employment, they must be paid out in their Final Pay, based on their Other Leave Rates as at their last day of work, regardless of their rates at the time the days were earned. PayHero will take care of this for you automatically if an employee has an Alternative Leave balance when a final pay is set for them.
Alternative Leave days paid in this way do not affect an employee's finish date for the purposes of determining whether any upcoming public holidays should be included in their final pay. Further details can be found in this article from MBIE.
If an employee works on a public holiday that's considered an Otherwise Working Day for them, they receive a full Alternative Day of leave, regardless of how many hours they worked on that public holiday.
When Alternative Leave is taken, the employee receives payment for the number of hours they would normally have worked on the day off. Further information can be found on MBIE's website here.
When employees are added to a draft pay, PayHero will include any approved, unpaid leave requests that fall within the pay period, but it won't bring in any unpaid leave requests from an earlier pay period.
To pay leave for an earlier pay period, you can create a One Off Pay for this employee and the previous pay period. This will include any unpaid time entries and leave requests. If they were overpaid salary in the original pay, you can also add 'Ordinary Time' to the pay with negative hours to deduct the overpayment.
Alternatively, if preferred you can instead revert the original pay back to draft, remove the employee and add them back to the pay so their new leave request is included. It's a good idea to download their payslip before removing them from the pay, so that you can compare for any changes that may arise.
Not a problem! When creating a request for a single day of leave, the portion of the day being taken can be specified via the Part Day field.
If you and the employee agree to allow leave in smaller increments than quarter days, the leave can be further adjusted once it's included in a draft pay by editing the Quantity. If the Quantity is set to Hours, you may specify the hours and rate the leave is to be paid at, but you must also specify Days, as that will determine how the employee's leave balance is reduced.
In this example, the employee works an 8 hour day but the employer has agreed to process 5 hours of leave, so the appropriate portion of their leave balance to be reduced is 0.63.
Our recommended approach is always to process leave via leave requests. Doing so ensures PayHero automates as much of the process as possible for you and creates a detailed record in the Leave tab for future reference.
However, if you'd prefer to enter Alternative Leave manually into a draft pay, you can do so by adding the 'Alternative Leave Taken' pay item to the employee's earnings. See the relevant section of the following article for details on this process: Processing Leave