Employee paying back minus leave

Question

An employee took annual leave in advance due to an emergency. He wants to pay this back by working his normal 38hr week (+overtime), but only getting paid for 30.4hrs (+overtime) until the leave goes back into positive.

Do I process his pay as normal 38 hrs and setup the payment as a deduction, as if it's an employee loan, then adjust the leave accrued manually?

Thanks

Lorri Neal · Answer

Thanks for your help Shaz,

He isn't going to be leaving any time soon and the company is prepared to let him accrue it back but he would rather pay it back one day/week.

Sounds like too much fluffing around to change it to a loan now.

Thanks

Lorri

Acctd4 · Answer

Hi Lorri

Annual leave accrual is 0.07692 hrs accrual per hr worked/paid (which is around 2.75 hrs p/wk, give or take).  Is he a long-term/reliable employee that's going to stay with you long enough to work it back again ?  If so, I'd just be allowing the run into negative as - like you say - it will otherwise get very messy.

Have a look at the Award that applies to the employee - If the employee is covered under a federal rather than state award, most of the modern (federal) awards actually now specifically allow employees to take annual leave in advance of it having been accrued.  However, there is also a new ‘model clause’ which permits the employer to deduct any subsequent ‘annual leave debt’ from the employee’s final pay, should their employment end before their accrued annual leave has returned to a positive balance.

As a loan .. If the loan is minimal & repaid in one full repayment, I think it's unlikely it would attract FBT but you would need to check that with your own particular tax agent.

Lorri Neal · Answer

Thanks Shaz,

He doesn't have to pay it back, he wants to pay it back so he can be in positive quicker that he would be if he was accruing it back at the normal hourly rate. He already had a holiday planned for Sept before he had to take leave in advance. I don't think he wants to have to take 2 weeks leave without pay, he'd rather just take one day a week unpaid, but it sounds a bit complicated.

The original discussion was that he would just accrue it back, so he was paid the annual leave + loading.

I feel like it's going to get messy.

Would the loan attract FBT?