Why and When is rounding important
Any time a leave or sickness allowance is allocated to an employee or updated automatically there is the possibility for it needing to be rounded to match company policies and/or to avoid the allocation of partial days which cannot be taken by an employee. Examples of this would include a new starter who joins midway through a month, or when an employee switches leave entitlement midway through a leave year.
This article steps through these scenarios and the configuration options that are available to HR Managers.
New Hires Pro Rata Formula
If an employee starts mid-way through the year, you will likely want to give them a portion of their annual leave entitlement. It's possible to do this by using the pro-rata formula, which gives you three different options for calculating how much allowance to give them. The Pro Rata Formula is set up on the Work Profile, go to Leave Admin > Work Profiles > select a Work Profile > Leave Settings > Employee First Year Allowance.
Let's work through and example of our sample employee,Jenny, who starts the business on 12th May. She is entitled to 21 days leave annually, the leave year runs January - December.
Our pro-rata formula options for Jenny are as follows:
- Disabled:The allowance will not be pro-rated and the entire amount of entitlement will be allocated to the employee. As there is no fraction of allowance, the rounding options do not make a difference to allowance if this is selected.
- Jenny would be allocated the full 21 days annual leave
- Months remaining from user start date: The allowance will be prorated based on the number of full months remaining from the employee's start date until the end of the employee's leave year. May is the 5th month of the year, so there are 7 remaining. Therefore 21 ÷ 12 months = 1.75 days. 1.75 days x 7 months = 12.25 days
- Jenny would be allocated 12.25 days annual leave in her first year
Months remaining from user start date (inclusive): The allowance will be prorated on the number of months remaining from the employees start date, including the partial month they join, until the end of the leave year. May is the 5th month of the year, so including May, there are 8 remaining. Therefore 21 ÷ 12 months = 1.75 days. 1.75 days x 8 months =14.
Jenny would be allocated 14 days annual leave in her first year
Days remaining from user start date: The allowance will be prorated based on the number of days remaining from the employee start date until the end of the leave year. There are 233 days between 12th May and 31st December. Therefore 21 ÷ 365 = 0.057 (which gives you how much allowance Jenny is awarded per day). 0.057 x 233 days remaining = 13.40
Jenny would be allocated 13.40 days annual leave in her first year
Allowance Annual Rounding
Allowance annual rounding is also specified on a Work Profile and applies whenever an allowance is allocated for a leave year. This would include our example for Jenny above which resulted in 13.23 days, but it can also apply when using the allowance calculator after an employee changes their Work Profile mid-year. Where you do not want to allocate an employee a fraction of a day (like 0.23 days), you will want to apply rounding to conform to the policy declared in the business. Available rounding options are:
- Do not round - Jenny's allowance will stay at 13.40 days
- Round up to nearest half day - Jenny's allowance will round up to 13.5 days (if the fraction is above 0.5, it will round to a whole number, e.g. 13.76 would round to 14)
- Round up to nearest day - Jenny's allowance will round up to 14 days
- Round down to nearest half day - Jenny's allowance will round down to 13 days (if the fraction is above 0.5 it will round to a half day, e.g. 13.76 will round to 13.5)
- Round down to nearest day - Jenny's allowance will round down to 13 days
- Conventional rounding (up or down) to nearest day - fractions between 0.1 and 0.4 will round down, fractions from 0.5-0.9 will round up. Jenny's allowance of 13.23 days will be rounded down to 13 days
- Conventional rounding (up or down) to nearest half day - fractions between 0.1 and 0.4 will round down, fractions from 0.5-0.9 will round up. If Jenny's allowance were to have computed to 13.26 days it would be rounded up to 13.5 days