Thank you for visiting our Partner Zone. This area is an exclusive space for MYOB Partners. Find out how to Partner with MYOB.
Hi everyone, I am a newbie to this forum. I have found it very useful in the past reading other people's questions and answers etc.
My query is around the annual leave rate after someone has come back from maternity leave. This staff member was originally working 40 hours per week (8 hours x 5 days). She took 6 months maternity leave and came back about 3 weeks before her anniversary date. When she came back, she worked very reduced hours of approximately 13 hours a week (plus some more as needed) until about 3 months after she returned to work when she then built back up to 37.5 hours per week.
She returned back to work on 4/10/16. Over the Christmas holidays, in the pay cycle ended 6/01/17 (which is for a fortnight), she was paid for 13 hours of stat days at her normal hourly rate ($25/hr) and 13 hours of annual leave at her normal hourly rate (which I now realise I shouldn't have done but I relied on advice from our accountant at the time). Yesterday I was speaking to the help desk who advised that I should restore the backup for this paycycle to see how much should have been paid etc. Now other forum posts and the support notes on the website speak about annual leave after maternity leave being paid out at a really reduced rate due to the fact it is based on average earnings. However, when I went back in to enter in the details and followed through the instructions from http://help.myob.com/wiki/display/suppr/Setting+up+an+employee+on+parental+leave+and+paying+annual+l... the annual leave rate actually came out at $27.71846/hour (which is more than her normal hourly rate). This is because the average weekly earnings rate based on her last 12 months earnings, is now divided by her very reduced normal hours per week (13 hours now as opposed to 40 hours previously). Is this correct?
Many thanks in advance for any advice.
When an employee returns from maternity leave the leave rate is normally much less than the ordinary rate of pay - as the average of the previous 12 months earnings is spreading those earnings over a period that didn't include any pay. It normally takes about 12 months for an employee to return to a normal average rate of pay unless they are doing lots of overtime. When the employee went on parental leave - did you define the dates of cmmencement and return in the Other Leave tab - the system needs this to be able to allow the rate to go below the normal rate of pay. Also are you still doing the average calculation over the full 52 weeks (including the time taken off) and not just over the weeks worked?
Thanks for your reply Jennie. Yes I had entered the dates for commencement of parental leave as 4/04/16 and return at 4/10/16. I can see in the calculation that it is taking into account her gross earnings over the last 12 months and dividing this by 52 weeks to get the average weekly amount of $360.24. When she was originally working 40 hours per week before she went on maternity leave, her average weekly amount would have been $1,000.
However, the calculation is then using her "current at that stage" normal hours of 13 hours/week as a divisor for the $360.24 to get an average hourly rate which is why it is $27.718/hour. (see the first file). The thing is that although she came back with the intention of working 13 hours/week from Oct 2016 until early in 2017 when she was going to increase her hours, she actually worked an average of 16.25 hours/week (only in one fortnight before she took these annual leave days had she done 26 hours - we have a fortnightly paycycle). If I input under 'maintain employees' her normal hours as 2 days, 8.12 hours/day to get weekly hours of 16.24 hours, then when I re-do the pay, this time the annual leave rate is $22.18842/hour which is calculated using the same average weekly amount over the last 52 weeks of $360.24 and then this is divided by 16.24 hours/week to get the average hourly rate. (see the second file).
In this fortnightly paycycle, I was paying 13 hours of stat days (as two public holidays during this fortnight), and 13 hours of annual leave.
It seems that the calculations are all to do with what I have inputted as her normal working hours...
The next time I paid annual leave, her normal hours had increased so this will probably decrease her average rate. I haven't actually gone back and inputted these figures yet, just trying to get this one right before I move on.
Looking at her return to work date - she has now been back at work for 12 months - so her average earnings are now calculating on the full year she has been back at work. The issue seems to be be what you put in for her "normal hours per week" in the leave details tab - so if she was set at 13 hours per week and actually working 16 hours per week - I would expect to see her hourly rate slightly higher than her ordinary rate of pay. What you need to determine is what are her normal working hours per week and I would err on the less rather than the more. At her next anniversary date - I would work out the average hours per week over the full year and let the anniversary roll with the average hours per week - assuming she is gradully increasing her hours back to fulltime. It is not ideal to change the normal hours per week during the year -as the calculation then recalculates for the whole year.
Hi Jennie, thanks for your reply. I'm actually going back in time and trying to work out what she should have been paid in the fortnighly pay cycle ended 6/01/2017. So at that stage she had only been back from maternity leave for 3 months so her average weekly earnings at that date using the 12 months gross earnings was $360.24 which is a lot lower than what she previously used to earn before she went on maternity leave of $1,000 per week. It's the divisor which is causing the difference in the annual leave rate. Because I had inputted into MYOB that her normal hours were 13 hours per week, the annual leave rate is using this to give the hourly figure of $27.718 ($360.24/13 hours = $27.718). However, she was on average actually working 16.24 hours/week.
I think though I should stick with what she had agreed to do which was 13 hours/week as her "normal hours" under maintain employees, as like you say it is better to err less than more. I also only paid her a quantity of 13 hours/week instead of the average hours she had actually ended up doing, so I think then it makes sense to base the rate on 13 normal hours as that's what she was paid for.
I have livechatted with someone at MYOB who said I should change the "normal working hours" under "maintain employees" whenever a staff member changes them, but then make a manual adjustment of what 4 weeks should look like at their anniversary based on their average hours.
Sorry - I disagree with the MYOB LIvechat person - because if you change the normal hours per week - this is what is causing your problems - this calculates the leave based on the previous 12 months at that normal hours per week - which in your case is not correct. We only advise our clients to change this at the anniversary date and calculate what it should have been manually for the previous 12 months.
October - last edited October
Thanks for your reply. Yes, it definately is the normal hours which changes the hourly rate as during this whole process I have realised that the normal hours is used as the divisor for the annual leave hourly rate calculation. However I have gone back in and worked out what the leave rate should have been for the 3 times she took annual leave in the 12 months after returning from maternity leave. The hourly rate is actually only higher for one of the periods where she took annual leave (for the pay cycle ended 6/01/2017). Soon after she took annual leave in the fortnighly pay cycle ended 6/01/2017, she started working 37.5 hours per week - this is now her standard hours. So when I changed the 'normal hours' under 'maintain employees' at that stage to 37.5 hours and then worked out what she should have been paid for annual leave in the fortnights ended 28/04/2017 and 9/06/2017, the annual leave rate was greatly reduced. In the pay fortnight ended 28/04 it was $9.13040/hr and in the pay fortnight ended 9/06 it was $11.90267/hr. So overall it turns out that I have overpaid her.
In one point of view, although it is high, the $27.718 hourly rate (based on a divisor of 13 hours) does seem logical for that particular fortnight ended 6/01/2017, for the reason that I was only paying the staff member for 13 hours per week. If I was paying her for 40 hours per week at a really low rate (using a rate calculated on her previous standard hours before she went on leave of 40 hours) then the same end weekly figure would be achieved I think as MYOB is trying to work out average weekly earnings over the last 12 months rather than average hourly earnings.