Journalise the leave entitlement value
The value of the leave entitlement of all employees can be journalised using Profit Payroll. This is especially important for publicly traded companies: these companies are required to include the value of leave entitlement in the financial reporting. The value of the leave entitlement is equal to the leave entitlement in hours, multiplied by the hourly wage.
Note:
The determination of the leave balance during the calculation of the wages in Profit Payroll does not fully match the determination of the leave balance in Profit HR. This allows for small variations between the leave balances in Profit HR and Profit Payroll. Because of this choice, the performance of the calculation of the wages is not noticeably affected by determining the value of the leave entitlement.
There will be no differences on an annual basis, provided that you apply leave periods of one calendar year (1-1 to 31-12). If wages are processed every four weeks there can be a small difference because of the shifted periods. The accrual and taking of leave hours on the days that fall outside the calendar year are included in the wage processing period in which the days fall.
Profit can only determine the value of the leave entitlement for leave types based on actual costing if the leave can be taken in HR.
Description
The value of the leave entitlement is journalised using leave balance groups. Profit contains five predefined leave balance groups: you can, therefore, journalise five different leave balances. Each leave balance group is linked to a fixed wage component:
Leave balance group |
Wage component |
|---|---|
1 |
Reservering verlof uit HRM in geld 1 (100.009.063) |
2 |
Reservering verlof uit HRM in geld 2 (100.009.064) |
3 |
Reservering verlof uit HRM in geld 3 (100.009.065) |
4 |
Reservering verlof uit HRM in geld 4 (100.009.066) |
5 |
Reservering verlof uit HRM in geld 5 (100.009.067) |
Each wage component contains a parameter for the cumulative value of the leave entitlement at the beginning of the period and a parameter for the cumulative value at the end of the period.
Note:
Each wage component has a comment in which the operation of the wage component is explained. Always take a look at this explanation on the Comment tab in the properties of the wage component in the CLA. If you do not have the wage component available, first activate it.
Link a leave type to a leave balance group/wage component
You link the leave type to the required leave balance group. You can link several leave types to one leave balance group. Profit determines the leave entitlement value of the leave types with a link to a leave balance group; leave types without a link are excluded and their leave entitlement is not journalised.
Example:
You use the leave types ATV and Vakantie. You have the following options for journalising the leave entitlement value:
- You want to journalise the total value of the leave entitlement to one leave balance group
Link both ATV and Vakantie to leave balance group 1.
- You want to journalise the value of the leave entitlement per leave type
Link Vakantie to leave balance group 1 and link ATV to leave balance group 2.
- You want to journalise only the value of holidays
Link Vakantie to leave balance group 1. You do not link ATV to a leave balance group, so the value of ATV is not journalised.
Calculation of the leave entitlement value
Per leave balance group Profit calculates the cumulative leave entitlement value at the beginning and end of the period. The difference between these amounts is the value of the leave entitlement and this is posted to the wage component:
Leave entitlement value for period = value at end of period -/- value at start of period
Profit uses the total leave entitlement per leave period (basic leave entitlement + extra leave entitlement) and divides this evenly across the periods to be journalised. The additional entitlement will be divided over the whole year with regard to a leave period of a calendar year even when the effective data of the extra leave occurs later on during the calendar year. Profit deducts the leave take-ups and corrections for each period to be journalised from the leave entitlement. Profit calculates the leave value at the end of the period on the basis of the then current hourly wage and the leave value at the beginning of the period on the basis of the hourly wage at the end of the previous period. As a formula this looks as follows:
End of period:
Leave balance at end of period =
(+ Opening balance of the leave period that applies on the end date of the wage processing period
+ Periodical entitlement (including extra leave) of the leave period that applies on the end date of the wage processing period
- Uptakes between the start date of the leave period and end date of the wage processing period
+ Corrections between the start date of the leave period and the end date of the wage processing period)
Leave value at end of period = Leave balance at end of period x Hourly wage for current period
Start of period:
Leave balance at start of period =
(+ Opening balance of the leave period that applies on the end date of the wage processing period
+ Periodical entitlement up to the previous period (including extra leave) based on the leave period that applies at the end of the current period.
- Uptakes between the start date of the leave period and end date of the previous wage processing period
+ Corrections between the start date of the leave period and the end date of the previous wage processing period)
Leave value at start of period = Leave balance at start of period x Hourly wages for previous period
The value at the beginning of a period is equal to the value at the end of the previous period. This is not the case, however, for the period of commissioning, because then the data from the previous period is not known. This is why the above method is used. If the hourly wage of the previous period is not known, you need to enter it manually. This is a one-time action that may be necessary after the commissioning of Profit or after a CLA migration.
Profit includes the accrual, leave taken and corrections from the start date and up to the end date of the current wage processing period. RAE entries are created if during a period the leave balances still change after approval of the salary processing. For example, in case of monthly wage processing you can approve on the 22nd day of each month, whereas even after the 22nd day leave entries or corrections can still be added.
When determining the opening balance in the above formulas, Profit takes into account the employment start date and employment end date of the employee. This is only relevant if the employee starts or ends employment during the leave period.