Vacation Accrual is a special Deduction Type(s). The Vacation Accrual deduction code is setup through the regular Deduction Code Update. It has its own Calculation Type VA. Once the Vacation Accrual code has been set up correctly it is applied like a regular deduction code. The Vacation Accrual Factor is defined as a percent in the Employee Amount on the Employee Master.
The vacation accrual is calculated during deduction generation and appears on the Cheque Register. The accrual is based on all Vacationable Earnings during the pay period and the Vacation Accrual Factor for the employee. During the deductions post this amount is added to the Vacation Accrued for the employee in the Time Bank indicated for the deduction code.
Rate Codes contribute to Vacationable Earnings in various ways. The Rate Code must be identified as earnings before it can contribute to Vacationable Earnings. If the Rate Code is vacationable for regular earnings(Vacation = R), only the earnings from the regular hours (or units) are considered vacationable. If it is vacationable for gross earnings (Vacation = G), the earnings from regular and both overtime hours are vacationable.
Accrual Banking is used to implement vacation accruals and payments. It is not needed when vacation pay is paid out immediately. An accrual bank is a net total accumulator for a particular Bank Code attached to an employee. In regular operation it is updated by designated Deduction Codes, and shows the net amount outstanding at the time. This value can be changed directly through the Banks(F8) portion of the Employee Update. No deduction entry is created for such changes. Unlike the deduction reports which show year-to-date totals, this is a current total that is not affected by the year end.
The accrual bank, in this case VAC, must be set up for each employee before it can be used. If it is not created the accruals will not be totalled and therefore there will be no outstanding total when you generate the Vacation Payment. An opening outstanding amount can be entered at set up. Each Deduction Code definition that affects this Accrual Bank must have VAC in the Accrual Bank. A Deduction Code can only affect one Accrual Bank through this method.
Usually the vacation paid is not subject to vacation accrual. However, British Columbia requires that accrual be made on vacation paid for ongoing employees. A separate Calculation Type, V0, has been set up for this purpose. Using this Calculation Type, the accrual for the current pay period is NOT paid out immediately. Instead, it becomes the opening accrual for the next period.
Vacation Payment is an income Deduction Type I. The Vacation Payment code is setup through the regular Deduction Code Update. It has its own Calculation Type VP. Once the Vacation Payment has been set up correctly it is applied like a regular deduction code.
Vacation payment can be done at any time as part of a regular payroll run. In the case of payouts to certain individuals this is the preferred approach. For annual payouts and some other departmental forms of payout this would cause difficulties with high taxation rates and another approach may be more suitable.
If an individual employee is to receive his full vacation accrual, the payout is activated by adding the Vacation Payment code, and optionally the Vacation Pay Accrual code, to the employee's deduction set to be applied once. The total vacation accrued on the employee master plus any current period accruals are calculated for payment by the generation function.
When all accruals for a department are to be paid out in a special pay run, a special pay period is used. A special deduction set, e.g. 6, is setup on the department definition for this purpose. This deduction set includes the Vacation Payment code, at minimum. If there is to be accrual based on this payment, a vacation accrual code will also be included in the set. You may not calculate taxes for this period because the tax rates would be out of line. One way to make allowance for taxes is to set up a deduction code for Vacation Taxes at a fixed percent of gross earnings. The Vacation Tax code is a nontaxable deduction type with the rate in percent in the Employee Amount. The Vacation Tax code is the last one in the special deduction set. Other deductions could be included in the deduction set if desired. This type of pay period does not normally follow the pattern for Run Control, so some steps may need manual completion before the pay period is closed.
There are a variety of results that can be achieved by using different combinations of vacation calculation codes. This is best discussed through examples, starting with a routine accrual situation. Our employee will have an accrual rate of 5% and an opening accrual balance of $400.00. The vacation accrual code VA is in the Department Deduction Set.
A special Calculation Type has been set up which pay out the accrual on the same cheque on which it is earned. This code is used in place of the regular vacation accrual code. Our example employee has an accrual rate of 5%. There is no opening accrual balance because it is always being paid out.