Answer
If an employee will not be paid for a period but you do not want to terminate them, untick Active pay recipient? on their record. They stop appearing on pay runs while their employment record stays continuous.
Where to find it
- Desktop app: go to Employees >> Pay Settings >> Pay Rates and untick Active pay recipient?.
- Online app: open the employee, choose Pay Settings, then the Pay Rates tab, untick Active Pay Recipient? and save.
What this does
- They are left out of new pay runs. Any pending pay they already have is removed the next time that pay run is opened, so this affects the current pay run as well as future ones.
- Completed pays are never touched, and nothing already reported to the ATO or Inland Revenue is changed.
- They still appear in your employee list, and they still count toward your employee limit. Only terminating an employee frees a licence slot.
- Rostered shifts are still created for them, so clear those separately if you use rosters.
- You can still pay them manually if you need to. The Create Pays wizard does not filter them out.
What happens to leave in Australia
Annual leave, personal leave and long service leave all accrue when a pay is processed, so an employee with no pays accrues none of them for that period. This is not backdated when you tick the setting back on, so if leave should have accrued over the break you will need to add it manually.
Please note the Long Service Leave report works from length of service rather than from pays, so it will keep showing a rising figure that no longer matches the accrued long service leave balance.
What happens to leave in New Zealand
This setting does not stop New Zealand annual holidays or sick leave. Both are granted on the calendar from the employee's start date. If a 12-month anniversary passes while they are unticked, they still receive the full four weeks of annual holidays, and a sick leave anniversary still delivers the 10 days.
The same is true when accrue-as-you-go is turned on. The per-pay accrual stops, but the anniversary top-up is worked out as the full entitlement minus whatever actually accrued, so the employee is brought back up to the full entitlement anyway. See How Do I Set Up Accruing Annual Leave As You Go?
Leave balances are shown as at the last completed pay, so the figure will look unchanged during the break and then jump when the next pay is completed. That is the missed anniversaries being recorded, not an error.
Terminating the employee is the only thing that stops New Zealand entitlement from vesting. Lightning Payroll cannot defer or shift an anniversary for a period of unpaid leave.
Turning them back on
Tick Active pay recipient? again and they are included the next time the pay run is opened. Nothing needs to be re-entered, and their history, year-to-date figures and leave balances are preserved.
Other ways to handle a break
- Leave the setting on and zero the pay. The pay is still created, so you can clear the hours or record unpaid leave against it. Use this if you want the employee to keep appearing in the pay run.
- Delete the pending pay each period. Practical for a break of only a pay or two.
- Terminate now and reinstate later. The better choice if they may not return. Termination creates a final pay with any leave payout, records the employment end date for STP or payday filing, and frees a licence slot. Bringing them back uses the Reinstate Employee wizard, which sets a new start date.
