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LKR-CDG
21-03-2014, 03:23 PM
We are currently in the process of negotiating our new EA and we have decided to incorporate the leave loading into the base hourly rate. We used the following formula, say for someone full-time on $35 per hour.

($35 x 1976 hours) + ($35 x 4 weeks x 17.5%) to get annual salary then divided by 1976 hours to get back to a factored up base rate.

I have now been asked the question "What about the loading on my current leave balance? How will that be paid?"

Great question which I am unsure how to answer. :confused: I would be grateful for any suggestions as we really want to get this EA over the line.

Thanks - Lindy.

Tiger
22-03-2014, 08:06 AM
I seem to have lost reply I was in the middle of?? So to start again for you.

Payment of A/L/L will be governed by the Award or EA your employees are covered by.
As to your question of what to do now. Some organizations pay A/L/L as employees take it, others on an annual basis, often at Xmas, and some at the anniversary date of hire of the employee. The latter because A/L/L is only payable on a completed year of service.

But if you've not been paying it and there is nothing in your employment contracts to say it is not paid, then you will need to go back and pay what is owed on this. You would need to look at each employee, starting with end of their first year with you, calculating it on the salary being earned at that time and do this for each subsequent year and for each employee. However, only do the back pay to either the date of your new EA taking effect or if that still a way ahead, then to the last anniversary date of hire of each employee.

It is good you are being pro active in getting rid of this archaic loading. Few large organizations pay it any longer and smaller organizations are following. Just be sure that you cover this removal of A/L/L for your non-award/EA employees by incorporating a clause in your employment contracts from now on.

Lastly, as to calculation, most common approach is to calculate it on the annual (base) salary. So using your $35 hour value ($69,160 p.a.) calculation is as follows:
$69,160 pa divided by 52 x 4 (weeks A/L) = $1,330 pw x 4 = $5,320 x 17.5% = $931 A/L/L p.a. Someone taking one week's A/L would thus receive $17.90 of A/L/L.

Hope this helps
Tiger

LKR-CDG
24-03-2014, 08:44 AM
Thanks Tiger, but the question is how do we treat the current balance of leave loading if we are going to increase the base salary. So the situation is:

1. Current rate of $35-00 now factored up to $35-4697
2. Annual Leave balance of 165 hours

We will now be paying all his ordinary hours and leave hours at the rate of $35-4697 (which is now inclusive of leave loading). Do we need to somehow payout any of the leave loading balance?

I look forward to hearing from you. Thanks.

Tiger
24-03-2014, 09:37 AM
You pay whatever A/L/L is applicable to employees' completed years of service which you've not yet paid, based, as I said before, on their then current pay rate.

You go back to whatever year, get the pay rate for that year and calculate the loading as I advised, then the following year and the following. As 165 is only a little more than four weeks (4.3421 weeks by my calculation), you're only going to have to check last year's salary as some of that leave may have carried over from the previous year. So if you have to calculat the A/L/L on two pay rates, then do so, add together and that is what is due.

1. Current salary $69,160 - assume that employee has completed his current year and hasn't taken any A/L this year - thus loading of $931 is due.
2. Assume his salary last year was $69,000 and he has a balance of 0.342 of A/L he didn't take, then the A/L/L on that would be 16 cents.

The above of course assumes that for this employee you've been paying A/L/L as he took his A/L. If that is not the case, you have a bit of back calculating to do.

Obviously in my example calc, I just took a number out of the air. You will have to calculate based on what the salaries were, not what the increased salary will be. I hope that is clear now.

Tiger

bullswool
08-04-2014, 11:21 AM
Now that you have increased the salary to $35.4697 to cover the A.L.L. you are paying out the A.L.L. when the leave is taken, no?
So you won't need to make a lump sum payout.... or am I missing something.

Were you previously paying leave loading?