Xero – Adjust Sick, Annual, Personal or Carers Leave Balance Accrued the Best Way

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Annual leave and sick/personal/carer’s leave accrues for your employees every time you process a pay run in Xero. If an employee has been on leave, a leave request should have been submitted and approved in Xero. If this has been done correctly, your employee’s accrued leave balance will reduce by the number of approved leave hours when you process the pay run that covers that time period.

Sometimes these steps are not followed correctly. When this happens your employee’s leave balance will not reduce when you run payroll. To fix this, you must manually adjust the employee’s leave balance to reduce it to the correct number of hours owed.

There are two ways you can do this in Xero:

  1. The Easy Way: by entering a negative opening balance to the employee’s leave accrual
  2. The Best Way: by posting an unscheduled pay run to process the number of leave hours taken by the employee

In this tutorial we will go through The Best Way. To learn about The Easy Way, please go here.

The Best Way to Adjust Leave Balances

The most thorough method of manually adjusting leave balances for employees in Xero is to post an unscheduled pay run. The main benefit of doing it this way is that it leaves an audit trail.

To make the adjustment, go to Payroll → Employees in the main menu:

Click on the name of the employee you wish to adjust. In this tutorial we will select Odette Garrison:

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Click on the Leave tab to see the accrued balances of annual leave and sick/personal/carer’s leave owed to Odette:

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In the Leave Balances section we can see that Odette has 27.0574 hours accrued of Personal/Carer’s Leave. Keep this in mind. After we have posted the unscheduled pay run we will go back and check this balance to see if it has been adjusted.

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In the main menu click on Payroll → Pay Employees:

Click on + Add Pay Run:

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In the drop down box, select Unscheduled Pay Run:

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Next, choose Weekly Calendar in the Select a payroll calendar drop down. This is because Odette is included in the weekly payroll calendar. Then, choose a Pay Period in the Select unscheduled pay period drop down. The option you choose should cover the date you are following this tutorial. Then hit the Next button:

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Here you can select which employees to include in the pay run. As we are only going to adjust Odette’s leave balance, click on the grey circular button at the right hand end of the row for Odette:

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A green tick should appear in place of the grey button and Odette’s pay details should populate. Click anywhere on Odette’s row to be taken to her pay template:

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Now you must create a blank pay slip for Odette by removing all of the items that have automatically populated from her payroll template. For Odette, create a blank pay slip by clicking on the cross to the right of each of these lines:

  • Ordinary Hours
  • HESTA Super Fund – SGC – SPIN (i.e. her superannuation payment)
  • Annual Leave

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To finish creating a blank pay slip for Odette you also need to bring the PAYG Tax Adjustment amount to zero. To do this, click on + Add Tax Line:

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Next, type “Bring adjustment to zero” into the Description of the Add a Tax Line box and press OK when ready:

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Enter a value of -5.00 (minus five) into the Amount field and press enter or tab. You should now have a total value of 0.00 in the Tax section of Odette’s pay slip:

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Odette’s pay slip should now be completely blank. Her net pay should be 0.00 and she should not be accruing any leave. You are now free to add the sick leave adjustment and save Odette’s pay slip. Click on + Add Leave Line towards the bottom of the template:

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An Add a Leave Accrual Line box will appear. Ensure that Calculate leave accrual is set to No and press OK:

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Now we can enter the number of sick leave hours we want to subtract from Odette’s balance. For this tutorial we will subtract 7.6 hours. To do this, type -7.6 in the Hours field of the Annual Leave line and press enter or tab.

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Once you are finished, hit Save and then Close at the bottom of the screen:

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After you are taken back to the pay run screen, hit Post Pay Run. A box will appear asking if you are sure you want to post the pay run. Hit Yes and the pay run will be posted:

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Finally, you can check to see that your adjustment has been posted correctly by going to Payroll → Employees → Odette Garrison → Leave. Here you will see that her Annual Leave balance has been reduced by 7.6 hours. Before you posted the pay run Odette’s annual leave balance was 27.0574 hours. Now, it is 19.4574 hours, which is 7.6 hours less than before:

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You’re All Set!

That’s it for this lesson. Find lots more helpful articles via the main menu or check out our main blog page here.