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Leave Paid Out

If an employee is leaving your employment, they are entitled to receive payment for any outstanding annual leave that they have accumulated and not taken. To add this payment to a payslip:

  • Go to the employee’s profile.
  • Click on Add next to Payslip Inputs.
  • Click Leave Paid Out under Income.
    • SimplePay will default to paying out the remaining annual leave balance using the rate calculated by the system (see the note below). You can override both these values if you wish (discussed here).
  • Click Save.

Note

If the employee is on a leave entitlement policy where their full leave entitlement is given upfront, the leave balance that will be paid out will be pro-rated. The pro-rata leave balance is calculated as follows:

(Number of completed months of service ÷ 12 months) × Number of days of annual leave entitlement

If the above calculation results in a fraction, this is rounded down if the fraction is less than 0.5, or rounded up if it is equal to or greater than 0.5.

The system uses the normal annual leave rate to calculate the payment due. You should override the rate if the employee has additional benefits, such as employer contributions to medical aid or retirement funds, as these are not taken into account by the system.

Allowance in lieu

Under the Organisation of Working Time Act, 1997, it is illegal for an employer to pay an allowance in lieu of the minimum statutory holiday entitlement of an employee unless the employment relationship is terminated.

Overriding values

If needed, you can override the following values:

  • The calculated rate – Tick the Override calculated rate box, and enter a new rate next to Rate (per hour). Then, click Save.
  • The number of leave days to be paid out – Click Override next to Annual leave encashed, and enter the desired number. Then, click Save.

Cancelling an override

To cancel an override previously saved, click on Leave Paid Out under Payslip Inputs, and then:

  • For the rate, untick Override calculated rate, and click Save.
  • For leave days, click Cancel Override, and Save.

Understanding leave adjustments when leave is paid out

The system automatically adjusts the leave balance when processing Leave Paid Out. This will appear on the payslip as a negative adjustment, i.e. a decrease in the leave balance.

Note

The adjustment value displayed on the payslip is the net value of all adjustments made in that pay period. Therefore, if you make a manual adjustment and pay out leave in the same period, the adjustment value will be a combination of the leave paid out and your manual adjustment.

Example

  • An employee will be terminated on 31 January 2025 and is paid monthly (with the pay period ending on the last day of the month).
  • On 23 January 2025, the employer manually added 5 additional leave days (as a farewell bonus) using Leave > Adjustments.
  • By 31 January 2025, the employee has accrued 15 leave days, bringing their total balance to 20 days.
  • When the Leave Paid Out item is used, the system will default to paying out the remaining annual leave balance of 20 days.

The system recognises two adjustments in the January 2025 pay period:

  • Adjustment 1: +5 days
  • Adjustment 2: -20 days

The payslip will show a final net adjustment of -15 days (5 - 20 = -15) in the leave section.