What the Reduce by Leave Taken setting is used for
The 'Reduce by Leave Taken' setting ensures that when you add leave or public holiday worked entries for your employees their ordinary payment (wages or salary) are automatically reduced by the appropriate amount.
It is found in the payment settings. It should be enabled for employees who have been set up with a regular payment, such as a fixed number of hours for an hourly rate or a salary.
It does not need to be enabled for employees who have variable hours or timesheet their time, and as such are getting an actual number of hours worked recorded every pay.
Examples
Sally is set up on standard hours of 40 hours per week, paid at $30 per hour. Every pay time her hours are automatically populated in the pay run as 40 hours.
Sally needs the 'reduce by leave taken' setting on so that if she takes 8 hours of leave, her standard hours are automatically reduced to 32.
James is set up to timesheet his hours every pay and his hours are different every pay time. He doesn't have standard hours that appear every pay. James does not need the 'reduce by leave taken' setting turned on, because if there is a day of leave he will not be submitting any timesheet hours for that day. His hours and any leave requests are added together to make the correct value to pay.
How it works
The following employee types should all have the 'reduce by leave taken' setting enabled for their main payment.
Salaried
Salary with timesheet
Salary with Top Up
Standard hours waged
Standard hours with timesheet
The following employee types generally should not have the 'reduce by leave taken' setting turned on:
Casual employees
Employees with no standard hours loaded in their settings or payment
⚠️ In certain cases a non standard hours employee may need to have the ‘reduce by leave taken’ setting turned on, e.g. If an employee working non standard hours happens to work on a public holiday and records this worked time on their timesheets, there will be a prompt in the Leave View area to activate the ‘reduce by...' button for that employee.
In the screenshot above PaySauce is asking the payroll administrator to “Click here to turn this setting on”. This allows the timesheet hours to be paid at the Public Holiday Worked rate (1.5), but still display the hours worked on the timesheet.
When leave (of any type) or a 'public holiday worked' is applied, the Reduce by Leave Taken setting will automatically reduce the standard hours/pay by the same amount that has been added as leave.
Leave reduction error
If you do not have the 'reduce by leave taken' setting on, you may encounter an error message explaining that the employee may be overpaid.
How to turn 'Reduce by Leave Taken' on
Go to the Employees section, click on your employee's name and then select the Payments tab.
Click on the name of the employees main (primary) payment.
Check on the box that says 'reduce by leave taken'.
Click Ok.
Checking that the reduction is applied
In any pay where an employee has a leave entry or a public holiday worked entry, you should see a downward arrow next to their main payment line. Hovering over this arrow will explain that the payment is being reduced and tell you the number of hours it was reduced by.
If you think the reduction hours are not correct, check the employee's work pattern (also found in their payment settings).
Reduction settings for public holidays worked
When your employee works on a public holiday, PaySauce will recognise the entry for public holiday worked and apply the reduction rule to ensure they don't get paid for both their normal hours and the time and a half hours for working on a public holiday.
There is a company setting that defines which rule to apply to reductions for public holidays worked.
What the law requires
Under the Holidays Act 2003, when an employee works on a public holiday, they're entitled to time and a half for the hours actually worked, plus an alternative holiday (a full day, regardless of the number of hours worked) if the day would otherwise have been a working day for them.
Importantly, the entitlement is based on hours actually worked - not the hours they would normally have worked. So if an employee usually works 8 hours on a Monday but only works 1 hour on a Monday public holiday, their legal entitlement is 1 hour at time and a half, plus an alternative holiday to take later.
The alternative holiday cannot be cashed out or exchanged for payment until 12 months after it was earned.
Why this can leave employees worse off in some cases
Under the strict legal minimum, an employee who works a short shift on a public holiday can end up earning less than if they'd simply had the day off.
For example, an employee who normally works 8 hours would receive 8 hours of normal pay if they took the public holiday off. But if they work just 1 hour, they'd only be paid for one hour at 1.5x their rate of pay - significantly less than their usual daily earnings.
What many employers do in practice
Because of this, many employers choose to "top up" the employee's pay so they're not disadvantaged for working. This means paying time and a half for the hours worked, plus normal pay for the remaining hours they would have worked that day. This is not a requirement.
Using the same example: the employee would receive 1 hour at time and a half, plus 7 hours at their normal rate - ensuring they're no worse off than if they'd had the day off entirely.
This top-up isn't legally required, but it's common practice.
How to configure this in PaySauce
You can choose how PaySauce handles public holiday pay for salaried employees in your company settings. There are two options:
Option 1: Deduct full normal hours (legal minimum) When an employee works on a public holiday, the system deducts their full normal working hours for the day and pays only time and a half for the hours actually worked. This follows the strict legal entitlement but may result in lower pay for short shifts.
Option 2: Deduct only hours worked (top-up approach) When an employee works on a public holiday, the system deducts only the hours they worked and pays those at time and a half. The remaining normal hours for the day are paid at the ordinary rate. This ensures employees aren't worse off for working.
To manage this setting, log into PaySauce on the web (not the app).
Go to Company Settings by clicking on your company name in the top left corner
Click the ‘Settings’ tab
The ‘Reduce Primary Hours Rule’ is at the bottom of the list of settings under general settings
Select ‘Hours worked’ if you want to reduce your employees’ normal pay on a public holiday worked based on the actual hours they worked on the day
Select ‘Work pattern’ if you want to reduce your employees’ normal pay on a public holiday worked based on their full normal hours for the day as set in their work pattern
Which option should I choose?
The best selection is what works for you and your business.
Some employers prefer Option 2 (the top-up approach) because it treats employees fairly and avoids the awkward situation where working results in less pay than not working. However, if your employees typically work their full normal hours on public holidays, the difference between the two options will be minimal. The right answer is dependent on how you want these days to be treated, and you can change it any time you need.