How does unpaid vacation leave work? Also, how do I process payroll with employees who are on unpaid vacation leave?

Notes: 

• Before proceeding with the below, please be sure with your accountant or auditor that providing unpaid leave is the correct solution for the process that you are running on your employee data. Should you still be in doubt, we recommend that you speak to the Inland Revenue Department. 
   
• It is also important to note that when approving unpaid vacation, the employee will have an auto–deduction automatically calculated and inserted into payroll, despite being a full-time or part-time employee. The auto-deduction is calculated by multiplying the number of hours of unpaid vacation approved by the hourly rate that the employee is entitled to. 
   
• Should you be looking to provide the unpaid leave due to the COVID-19 pandemic, we recommend that you see this article on the COVID-19 Wage Supplement announced by the Government of Malta in March 2020. 

Should I provide a part-time employee with unpaid vacation leave? 

Since a part-timer is paid based on the number of hours that they work, they technically are not entitled to unpaid vacation (as advised above, kindly check with the IRD). At the same time a part-timer can simply not work and not be paid. In this case, a part-timer will still have a pay of zero, and when calculating payroll, the system will still provide NI to the employee.  

How are NI adjustments made for employees in WorkForce Payroll? 

Please see the ‘Adjustments to National Insurance’ section in this article. 

Note: When selecting the deduction button, you will be provided with several checkboxes, where you can choose the Mondays for which N.I. will not be deducted. Please select the same button to add back any Mondays for which N.I. was removed. Please note that you will need to click the ‘Save’ button for any changes to appear on the pay run. 

How do I provide a full-time employee with unpaid vacation leave? 

If you do not have the unpaid vacation entitlement created, you would need to create the entitlement from the section listed below within the WorkForce Leave: 

Setup > Leave Types 

Alternatively, you can visit this WorkForce Leave URL to access the page: https://leave.workforce.com.mt/en/LeaveTypes  

Several Default Leave Types are already available in the ‘Select Leave Type’ drop-down menu, including the Unpaid Vacation*.  

Note: For the system to provide automatic calculations, is it essential the WorkForce Leave Administrators use the Default Leave Types provided, all of which contain a star at the end of the Leave Type name. 

Despite having unpaid vacation leave, employees will still be listed as paying NI in pay runs. Should you wish to deduct the NI, you can do so by clicking on the negative symbol ‘-‘ next to the NI during payroll process and select the Mondays that you would like to deduct. For more information, kindly refer to this article:  https://workforce.com.mt/docs/how-are-manual-payroll-adjustments-made/

An alternative solution to the above is to use the ‘Withhold Pay’ feature. To withhold the pay for an employee in pay runs, visit Employees section in WorkForce, click edit for an Employee, and in the ‘Employment Details’ tab, you will be able to select the ‘Withhold Pay’ option.

The checkbox for this is available at the bottom of the page. Once selected, click the ‘Save’ button at the bottom of the page. The employee will still appear in pay runs and the net pay will appear as zero. 

If you have queries on how to use WorkForce Payroll for the COVID-19 Wage Supplement, please contact DataByte Support.

To search for more information on how to use WorkForce, please visit: https://workforce.com.mt/documentation/