Selling (or paying out) holiday entitlement

Sometimes an employee may choose to receive payment for part of their holiday entitlement rather than take the time off. Leave Dates can be used to record the amount of leave that has been paid out and deduct it from the employee’s remaining annual leave balance.

The recommended approach is to create a dedicated policy within your existing Annual Leave allowance, such as Sold or Paid out. When holiday is paid through your normal payroll process, a negative adjustment is entered against this policy for the relevant employee.

Leave Dates allowances can contain multiple policies, which are added together to determine the employee's total available leave. Policies can contain positive or negative values, so a negative value can be used to reduce an employee's entitlement when holiday is sold or paid out.

On this page

Create a Sold or Paid Out policy

Pay the employee through payroll

Deduct the paid holiday from the employee’s allowance

Check the employee’s updated balance

1. Create a Sold or Paid Out policy

First, create a policy within your existing Annual Leave allowance. You only need to set this up once.

1. Go to Settings > Allowances.
2. Select your Annual Leave allowance.
3. Under Policies, select Add new policy.
4. Select Set amount per year as the policy type.
5. Give the policy a clear name, such as Sold or Paid out.
6. Set the Default annual amount to 0 days (or 0 hours if your organisation manages allowances in hours).
7. For the new calendar year, select Reset to the default allowance.

8. Click Add new policy to save the policy.

Setting the default to zero means the policy will not alter employees' normal holiday entitlement unless you specifically enter an adjustment for an employee. Selecting Reset to the default allowance also means that individual adjustments from the previous year will not automatically carry into the new leave year; the policy will return to its default value.

Your Annual Leave allowance may therefore contain policies such as:

Annual Leave = Leave entitlement + Carry over + Sold/Paid out

The Sold/Paid out policy will normally remain at zero until an employee receives payment for some of their holiday entitlement.

2. Pay the employee through payroll

When an employee asks to sell or be reimbursed for some of their available holiday, first determine how much holiday is being paid out and process the payment through your organisation's normal payroll procedure.

For example, suppose an employee has 20 days of available annual leave and your organisation agrees to pay them for 5 days.

Once those 5 days have been paid, Leave Dates needs to be updated so that the employee cannot subsequently use those same days to book leave.

3. Deduct the paid holiday from the employee's allowance

Once payment has been confirmed:

1. Go to Settings > Employees.
2. Select the relevant employee.
3. Open their Allowance tab.
4. Locate the Annual Leave allowance and select Edit.
5. Find the Sold or Paid out policy you created earlier.
6. Enter the amount paid to the employee as a negative number.
7. Save your changes.

For example, if the employee has been paid for 5 days in total during the current leave year, enter: 

Sold/Paid out: -5 days

The negative figure is important because negative policy values reduce the employee's total leave entitlement. Leave Dates specifically supports this approach for traded leave: a Sold policy reduces the leave available to the employee.

So, if the employee previously had 20 days available:

20 days Annual Leave − 5 days Sold = 15 days total allowance

Their annual leave allowance will therefore be reduced by the amount that has already been paid out.

4. Check the employee's updated balance

After saving the adjustment, check that the employee's annual leave balance has been reduced by the correct amount.

For an individual employee, you can review their updated balance in My Year. If you need to check allowance balances across multiple employees, you can use the Allowance Report. The same verification approach is used when recording paid overtime in Leave Dates, where an adjustment is made to the relevant allowance and the resulting balance is checked afterwards.

The employee's remaining holiday entitlement should now represent only the leave that is still available to be booked.

In the above example:

An employee begins with an annual leave entitlement of 20 days. The organisation agrees to pay the employee for 5 days of their remaining entitlement. After the payment has been processed through payroll, enter -5 against the employee's Sold/Paid out policy. Their total allowance will then reflect the five days that have been paid out, leaving 15 days available to book.They have then booked 4.5 days, leaving 10.5 days available. 

This process can be repeated whenever holiday entitlement is sold or paid out, ensuring the employee's Leave Dates balance accurately reflects the leave that remains available.