There are two situations in which you may need to change an employee from accruing Holiday Pay to being on Holiday Pay As You Go, which you can learn more about below.
Employee has been on a permanent contract and is changing to HPAYG
In this case, the employee should simply have their current contract finished and the new HPAYG contract started, using the following steps:
- Ensure a Final Pay is processed to pay out any existing leave owing.
- Reinstate the employee, as seen here: Reinstating or Restarting an Employee.
- Enable the Holiday Pay As You Go setting on the employee's leave tab.
Employee should have been on HPAYG from the start of their employment
In the instance that an employee was always on an HPAYG contract but the setting wasn't enabled, there are two options for processing the payment of accrued Holiday Pay. The correct approach depends on the amount to be paid out.
To Apply Lump Sum Tax: If employees have been accruing Holiday Pay for some time, it's arguable that lump sum tax should be applied to these payments (as with any other back pay). This can be achieved by setting the employee's next pay as a Final Pay, processing the pay to pay out their existing entitlements, then immediately reinstating the employee and putting them on HPAYG afterwards.
Catch-Up Pay: If the employee has relatively little Holiday Pay accrued, the approach above may not be appropriate. The second option is to go to the employee record and navigate to the 'Leave' tab. Tick the 'Pay As You Go' box. This will move the value of the Holiday Pay Accrued to the Holidays Paid Out balance. You can then amend the 'Holidays Paid Out' balance to be '0'.
When you next process a pay including those employees, the complete value of that Holiday Pay Accrued will be paid out. This will be greater than 8% and return a warning, but in this instance that will not be incorrect:
Whichever approach is used, after the accrued Holiday Pay has been paid out, the employee will receive their Holiday Pay entitlement in each pay going forward.