Annual leave and holiday pay

Xero creates two separate balances for each employee: annual leave and holiday pay. You can see an employee's annual leave balance in hours and holiday pay in dollars. You can also set up an employee to take leave in advance.

How it works

Annual leave:

  • Xero displays annual leave in hours for each employee. You can view an employee's annual leave balance in the 'Employees' section of Payroll. You can also set up an employee's payslip to display the balance.
  • You can set up employees to take leave in advance of the annual leave they accrue after a year on the job. Xero will subtract leave taken in advance from the employee's accrued leave at the end of their first year.

Holiday pay:

  • Xero displays holiday pay in dollars for each employee. You can view an employee's holiday pay balance in the 'Employees' section of Payroll.
  • Holiday pay accrues at 8% of your employee’s total gross earnings for each pay period. This balance appears on the employee's payslip as a dollar amount.
  • Xero resets an employee's holiday pay to zero each time they reach the anniversary of their start date. As the next year progresses, the employee's holiday pay accrues again.
Employees who leave during their first year get a payout for holiday pay. Those who leave after their first year receive a payout for holiday pay and any annual leave owed.

Include 'leave taken in advance' in leave balances

  1. In the Payroll menu, select Employees.
  2. Click the employee's name to open their details.
  3. Click the Leave tab.
  4. Click the Annual Leave balance amount.

    Image of the annual leave balance.

  5. Select the Include leave available to take in advance in the balance checkbox.
  6. Click Save. You can now approve leave for your employee even if they haven’t accrued enough days to cover the leave period.

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