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How to Calculate the Annual Leave Pay for a Terminated Employee?
How to Calculate the Annual Leave Pay for a Terminated Employee?
Workstem CS avatar
Written by Workstem CS
Updated over a week ago

Annual leave pay is one of the employee’s benefits. If the employment contract is terminated and the employee still has unused annual leave, the employer should calculate the employee’s annual leave salary based on the average daily wage in the past 12 months and pay it to the employee within the specified period.

Step 1

Add a pay item called [AL Balance Pay] in [Pay Items], and the pay type is [Income].


[Formula Alias] does not need to be filled in, the system will automatically enter the [Formula Alias] after filling in the [Name]. Besides, no spacing or symbol is allowed.

Step 2

In the [Pay Items], the system will automatically compute the balance of annual leave days for resigned employee. Search "balance day" in the [Pay item] to find for the pay item and there is no adjustment needed for the setting of the formula.

If you use the system to calculate the average daily wage of an employee, you can set the calculation formula of [AL Balance Pay] as value = AL Balance Days * Average Daily Rate, otherwise, no formula is required.

Step 3

When the employee resigned, the system will compute and retrieve the annual leave balance automatically.

If you haven't calculated the employee's daily average wage in the system, you only need to enter the employee's actual [AL Balance Pay] amount on the [Variable Salary Data] page, and enter the actual date of resignation on the occurrence date. The reason could be "Final Pay".

Step 4

Create a [One-time Pay Run] in [Payroll] > [Pay Run], enter the payroll policy of the resigned employee in the [Payroll Policy], select [Former employee under this pay rule] in the [Employees included in this pay run], and click [Calculate] to calculate the resigned Employee's annual leave pay.

If you want to display [AL Balance Days] and [AL Balance Pay] on the employee pay slip, you can enter [Settings] > [Payslip Display], drag and drop the items to the [Show Pay Items on Payslip] on the right.

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