Leave pay is what an employee is paid for the time they are on approved leave. For most leave types the employee continues to receive their normal pay, so leave pay is simply ordinary remuneration for days not worked.
What it means
When an employee takes annual or sick leave, they are paid as if they had worked. Payroll does not usually need a separate amount for this - the salary continues - but where pay is based on days or hours worked, leave pay makes up the difference so the employee is not short-paid for taking leave they are entitled to.
Where it fits in
Leave pay is part of normal earnings for the period and is taxed like ordinary salary. It is distinct from a leave payout, which is cash for leave not taken. For waged employees, the system has to convert leave days into the equivalent pay.
Key rules
- Normal pay for leave actually taken.
- For salaried staff it is simply continued salary.
- For waged staff it is calculated from the rate and the leave days.
- Taxed as ordinary remuneration, unlike a leave payout on termination.
