Leave Provision Calculations 

Purpose

This process provides an overview of how leave provisions are calculated for long service leave (LSL), annual leave and other leave types.

To configure the calculations, you must perform the activities in the Leave Provisions section of the Implementation Guide for Payroll Australia.

Prerequisites

Check your leave provision calculation factors in the Check constants for leave provisions section of the Implementation Guide for Payroll Australia.

Process Flow

To configure leave provision calculations for long service leave, you:

  1. Forecast leave liabilities to the end of the month using the Leave Liability Projection Accrual program (RPCLPVQ0).
  2. Multiply the LSL entitlement hours by the hourly rate and multiply the LSL accrual hours by the hourly rate.
  3. Add the two values together.
  4. If required, convert the resulting value to days.
  5. Define the LSL probablility factor based on the employees‘ years of service. For example, after three years of service, you apply probability factor PRF03.
  6. To calculate the years of service, the system compares the hiring date in the Events infotype (0000) with the entry into group date in the Contract Elements infotype (0016) and uses the earliest of the two dates.

  7. Define the leave provision factors based on the employees‘ years of service. For example, after three years of service, you apply escalation rate ESC03, inflation rate INF03 and bond rate BND03.
  8. Increase the value of the LSL provision by all the on-costs.

To configure annual leave and other accruing leave types, you:

  1. Forecast leave liabilities to the end of the month using the Leave Liability Projection Accrual program (RPCLPVQ0) to obtain entitlement and accrual values.
  2. To calculate the total liability, valuate entitlement and accrual hours by the hourly rate.
  3. If required, add leave loading to the total liability.
  4. Increase the calculated value by the escalation rate ESC11.

Use escalation rate ESC11, because escalation rates ESC01 to ESC10 are LSL escalation rates that are based on the employees’ years of service.

To configure non-accruing leave, you:

  1. Determine current entitlement and accrual hours.
  2. To calculate the total liability, valuate these hours by the hourly rate.
  3. If required, add leave loading to the total liability.
  4. Increase the calculated value by the escalation rate ESC11.

Result

All the values calculated are factored by any changes in work assignment (for example, changes to cost center).

Two new tables are generated in the payroll results cluster (RQ):

The tables store the details of the leave provision calculations described above and are summarised in the payroll results. The system uses the data to generate leave provision wage types. The wage types are stored in the results table (RT) according to the configuration in the Leave Provisions table (T5QLP) that links leave types to wage types. The wage types hold the total leave provision amount for the related leave types.

The wage types must be assigned a leave provision account to facilitate posting to Accounting.

The amount that is posted on a wage type is the total leave provision amount for an employee and may include negative amounts for leave liabilities posted in previous payroll periods.

For example, at the end of January an employee accrues a total leave provision of $5000. At the end of February, the employee’s total leave provision has accumulated to $6000. The $5000 posted in the previous month is brought forward as a negative value (-$5000) so that only $1000 leave provision is posted for the employee in February.

See also:

Leave Provision Calculation Factors