A man wants his leave balance paid out

"Shahid has twenty-eight days of annual leave sitting there. He says he does not want the leave, he wants the money. Can we pay him?"

What is really being asked

Turn days into rupees. Three decisions sit underneath that, and the client has to make all three before you touch a screen:

1. Which leave types can be cashed at all? Annual leave usually. Sick leave usually not.
2. How much is a day worth? Basic salary or gross salary, divided by a number the client chooses.
3. How many days may he cash, and how many must he keep? There is a yearly maximum and a balance he is not allowed to go below.

All three live on Leave Group, once per leave type. Leave Encashment then does the arithmetic for you. You never type a rate.

What you need in place first

• Leave Type - the leave type exists.
• Leave Group - the group the man's policy profile points at, with an encashment policy on the line for that leave type.
• Employee Leave Entitlement - he must hold an open balance. Encashment reads the balance, it cannot create one.
• Recurring Payments and Deductions - his salary must be on record, because the daily rate is worked out from it. A man with no recurring salary lines gets a rate of zero and nobody notices until the payslip.
• Wage Type - an earning wage type for the payment, if you want payroll to pay it without being asked twice.

Do this

1. Open Leave Group, pick the group, go to the Details tab and find the line for AL, annual leave.

2. Tick Encashable. Until that is ticked the leave type does not appear on the encashment screen at all, and the screen gives no reason.

3. Set Encashment Max Days to 10. That is the most he may cash in one calendar year, counting everything already cashed this year. Leave it zero and there is no yearly cap.

4. Set Balance To Keep to 15. He may not cash below this. With a balance of 28 and a keep of 15 he could cash 13, except that the yearly maximum of 10 bites first, so 10 is what he gets.

5. Set Encashment Rate Basis. Two values:

   • BAS Basic Salary - the rate comes from his basic salary alone.
   • GRS Gross Salary - the rate comes from the whole of his recurring earnings.

6. Set Encashment Divisor to 30. This is the number the salary is divided by to make one day. Thirty gives a calendar day. Twenty-six gives a working day on a six-day week, which is what most manufacturing clients in Pakistan ask for. There is no other place this number is read from, and a blank or zero divisor stops the encashment with "The leave group has no encashment divisor for AL - the daily rate cannot be worked out."

   Save the Leave Group.

7. Open Leave Encashment. Set Reason to REQ, Employee Request. Pick the payroll cycle, the pay period the money should be paid in, and the earning wage type that carries it onto the payslip.

8. Add one line: Shahid, leave type AL. Leave Encash Days blank and the screen fills it with the most he is allowed. Type a number and it is checked against that maximum.

9. Save. Rate per Day and Amount fill themselves, and Total Days and Total Amount add the lines up. You do not type any of the four.

10. Send it for approval. Nothing happens to his balance until it is approved. On approval, the days come out of his quota oldest first, so the entitlement that was about to lapse is the one turned into money, and one Employee Additional Payment Or Deduction document is raised for the pay period you chose.

11. Run Payroll unposted for that period and check the line is on his payslip.

The maths, in one line

Rate per day equals the salary divided by the divisor. Amount equals days multiplied by that rate. Both are rounded to two decimals.

Shahid on 60,000 basic, divisor 30, 10 days:

• rate per day = 60,000 divided by 30 = 2,000
• amount = 10 multiplied by 2,000 = 20,000

The salary used is the one on record at the encashment date, not the one he had when the leave was earned. See the maths.

Where two clients differ

	Factory, six-day week	Office, five-day week
Encashable	Annual leave only	Annual leave only
Encashment Rate Basis	BAS Basic Salary	GRS Gross Salary
Encashment Divisor	26	30
Encashment Max Days	10	15
Balance To Keep	15	10
Day rate on 60,000	2,307.69	2,000.00

Same man, same balance, two different cheques. The divisor is the single biggest number in this screen and the one clients argue about, so get it in writing.

The three reasons, and what each one changes

• REQ Employee Request - one man asks. This is the everyday case.
• YER Year End - the bulk run. Save with this reason and an empty grid and the screen fills itself with every encashable balance in the entity that is above its minimum keep. If nobody qualifies you get "No employee holds an encashable balance above the minimum keep." Check the lines before you approve: this one document can pay five hundred men.
• SEP Final Settlement - the leaver's encashment. This reason waives the balance to keep, because there is no later year to keep a balance for. The whole balance up to the yearly maximum is payable. Final Settlement picks up an encashment already raised with this reason rather than working one out again, so raise it before you prepare the settlement. See a man resigns on the fifteenth.

How you prove it worked

1. On the saved Leave Encashment, check Rate per Day against the salary divided by the divisor by hand. If it does not match, the rate basis is reading a salary you did not expect.
2. After approval, open Employee Leave Entitlement for Shahid. His annual leave balance must have dropped by exactly the days encashed, and it must not have dropped before approval.
3. Open the Employee Additional Payment Or Deduction document the approval raised. One line per employee, the amount matching.
4. Run Payroll unposted and find the line on the payslip. Encashment that is not on a payslip has not been paid, whatever the balance says.

What will go wrong

• No wage type was named on the encashment. The balance is still reduced and the ledger is still written, but no payment document is raised and nothing is paid. The man has lost his leave and received nothing. Always name the wage type before approving.
• The yearly maximum has already been used. He cashed 10 days in March, asks again in November, and the screen tells him he may encash zero. The message names the balance, the minimum keep and the yearly maximum, so read it rather than re-reading the policy.
• The divisor is different from the one the client uses on his own spreadsheet. 26 against 30 is a 15 percent difference on every encashment ever paid. Ask before the first one, not after the hundredth.
• The man's salary is not on record. The rate comes out as zero, the amount as zero, and the document saves perfectly happily. Check the amount is not zero before you approve.
• The balance moved between saving and approving, because he took leave in the meantime. The approval refuses and names how many days short he is. Re-save the document with the smaller number.