Set up and apply paid parental leave

Set up a custom pay item for paid parental leave (PPL). When your employee begins their PPL, adjust their leave calculations and add the new pay item to their pay template.

Set up a pay item for paid parental leave

  1. In the Settings menu, click General Settings
  2. Under Features, click Payroll Settings.
  3. Click the Pay Items tab, then click the Earnings pay item type.
  4. Click Add, then select Ordinary Time Earnings.
  5. Complete the fields:
    • Earnings Name
    • (Optional) Display Name
    • Rate Type - select Rates per Unit
    • Type of Units - enter ‘Weeks’.
    • (Optional) Rate per Unit
    • Expense Account - select the expense account the pay is coming from.
    • Exempt from Super Guarantee Contribution - select this checkbox.
  6. Click Add.

Add PPL to the employee’s pay template when they start their leave

When the employee starts their paid parental leave:

  1. In the Payroll menu, select Employees.
  2. Click the employee's name to open their details.
  3. Click the Pay Template tab, then click Add Earnings Line.
  4. Under Earnings Rate, select the Paid Parental Leave pay item you created earlier.
  5. Click OK.
  6. Enter details for their paid parental leave Earnings Rate, including Weeks they will be on leave and their Rate during this time. Xero calculates the Total automatically.
  7. Change the Rate for their Ordinary Hours or Hours per Week to 0.
  8. Click Save.

Now, each time you post a pay run where the employee is included, they'll receive pay matching their paid parental leave rate.

Adjust employee’s leave calculations when they start their leave

  1. In the Payroll menu, select Employees.
  2. Click the employee who is beginning paid parental leave.
  3. Click the Leave tab.
  4. Under Leave Balances, click the Annual Leave amount.

    Annual Leave amount.

  5. Change Leave Calculation Method to No Calculation Required.
  6. Click Save.

This means the employee will stop accruing annual leave while they are on paid parental leave.

When the employee returns to work from paid parental leave, you'll need to return to the Leave tab and change their annual leave back to their previous leave calculation method, for example Based on Ordinary Earnings.

You will also need to remove the paid parental leave earnings line from their pay template and update their Ordinary Hours rate.

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