Setting up vacation pay to be paid out per pay period ensures that employees—typically casual or part-time—receive their vacation pay (e.g., 4% or 6%) automatically on every paycheck rather than accruing it for later use.
Below is the step-by-step configuration guide based on the provided document.
Step 1: Create Pay Component Subtype (PCST)
Navigation: Payroll Administration > Payroll Setup > Pay Component Subtype > New
💡 Viewing Tip: To see the details clearly, click directly on the video to expand it, or right-click and select "Open link in new window" to watch it in full size side-by-side.
| Instructions | Visual Reference / UI Element |
|---|---|
1. Primary Information
Enter "Vacation Pay – 4% (Per Pay Period)" as the Name. Set the Pay Component Type to Leave and Category to Paid Leave. Enter 0.04 in the Rate field.
| [Primary Details]
Shows the Name field, the Leave dropdown selection, and the 0.04 decimal entry. |
2. Earnings Settings
Ensure OTE, Alternate Rate, and Taxable are checked. Pensionable is typically checked for Canada if you want RRSP or Pension to calculate in this amount but can be unticked if not applicable to your specific plan.
| [Earnings Toggles]
|
3. Accounting Setup
Select your Vacation Expense Account in the P&L Account field to ensure the debit side of the transaction maps correctly.
| [Account Mapping]
Displays the General Ledger selection for the Vacation Expense account. |
4. Main Configuration Logic
Check Loading (this is critical for the calculation to work). Set Percent Type to Gross Pay so the 4% applies to all earnings.
| [Video: Calculation Logic]
Demonstrates enabling the "Loading" toggle and selecting "Gross Pay" from the dropdown. |
5. Canada Specifics
Check Insurable (EI), Pensionable (CPP), and WCB Insurable. Map the T4 Reporting Box to Box 14. Leave "Vacation Pay on Vacation Pay" Check or Unchecked (If applicable).
| [Canada Settings] Shows the statutory checkmarks and the T4 Box 14 assignment for employment income. |
6. Finalize
Leave other regional sections (Australia, NZ, UK) blank or as-is. Click Save to complete the subtype.
| [Save Button] The final "Save" button at the top or bottom of the record. |
Step 2: Assign to the Employee
Once the subtype is saved, you must link it to the individual employee's pay record:
| Step | Action | Description & System Location | Visual Reference / Screenshot Tip |
|---|---|---|---|
| 1 | Access Record | Open the Employee Record |
|
| 2 | Navigate | Go to the Payroll tab | |
| 3 | Identify Line
Edit | Find the current Salary/Wages line (e.g., Salary or Regular Time) within the Regular Pay Components list.
Click the Edit link at the beginning of that specific row to open the line-level fields. | |
| 4 | Attach | Select “Vacation Pay – 4% (Per Pay Period)” in the component field. | |
| 5 | Save | Click Save at the top or bottom of the record. |
|
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Maintenance & Validation
The "Golden Rule" of Linkage
The vacation pay percentage is linked to a specific earnings line. If you replace a pay component or create a new hourly rate, the calculation stops. You must reattach the vacation component to the new earnings line whenever pay changes.
Step 3: Validate in Payroll
| Check | Expected Result | Visual |
|---|---|---|
| Calculation | The system automatically applies the percentage (e.g., 4%) to the gross earnings. | |
| Payslip | Vacation pay appears as a distinct line item on the employee payslip. | |
| Automation | The calculation triggers automatically every pay period without manual entry. |
Final Checklist
Calculation: Ensure the % is applying correctly to gross earnings.
Payslip: Verify that the vacation pay line appears as a separate item.
Automation: Confirm it triggers automatically in the next pay run.