Xero · Payroll Leave

How to Fix Xero Leave Accrual Error

Leave balances are wrong, leave is not accruing at all, or an employee shows a negative balance they should not have. Payroll runs but the leave numbers cannot be trusted.

At QuickFix Bookkeeping, the distinction that fixes most of these: leave accrues on the pay run, not on the calendar. If an employee is not included in a pay run, they accrue nothing for that period, no matter how much time has passed. A great many reported accrual errors are simply an employee who was left out of a pay run.

What Causes This

Not in the pay run

Leave accrues when a pay run is posted. An employee omitted from a pay run accrues nothing for that period.

Wrong calculation method

Fixed Amount, Percentage, and Based on Ordinary Earnings behave very differently. The wrong one gives plausible but wrong numbers.

Opening balance missing

Leave carried over from a previous system was never entered, so the balance starts from zero.

Hours per week wrong

Full time equivalent hours on the employee record drive the accrual rate. Wrong hours, wrong accrual.

How to Fix It

METHOD 1Check the Employee Was Actually PaidNothing is accruing
1

Go to Payroll, Employees, open the employee, and check the Leave tab against their pay run history.

2

Confirm they were included in the pay runs for the period in question. An employee on unpaid leave, or accidentally excluded from a pay run, accrues nothing for it.

3

If a pay run was missed entirely, you will need to process it, or make a manual leave adjustment to correct the balance.

METHOD 2Fix the Calculation MethodBalances are plausible but wrong
1

On the employee, open the Leave tab and check the calculation method on each leave type.

2

Fixed Amount accrues a set number of hours each pay period regardless of hours worked. Percentage of Gross accrues against earnings. Based on Ordinary Earnings ties accrual to standard hours worked.

3

For an employee with variable hours, Fixed Amount will always be wrong. For a salaried employee, it is usually right. Changing the method does not retrospectively fix past accruals, so correct those with a manual adjustment.

METHOD 3Enter or Correct the Opening BalanceBalance started from zero
1

If you migrated from another payroll system, leave balances do not come across automatically. They must be entered.

2

On the employee's Leave tab, set the Opening Balance for each leave type to the balance they carried over on your migration date. Without this, Xero starts them at zero and every balance thereafter is understated.

METHOD 4Check Hours Per WeekAccrual rate is off
1

Open the employee's Employment tab and check the Hours per week or full time equivalent figure. This drives the accrual rate for most calculation methods. An employee entered as 40 hours who actually works 20 will accrue leave at double the correct rate, and it compounds quietly every pay run.

Reading a Wrong Balance

What You See Usually Means Fix
Zero balance for everyoneOpening balances never enteredMethod 3
One employee not accruingOmitted from a pay runMethod 1
Accruing at roughly doubleHours per week overstatedMethod 4
Negative balanceLeave taken exceeds accrued, or a missing opening balanceMethods 1 and 3
Plausible but consistently wrongWrong calculation methodMethod 2

Fix It Before Year End

Leave balances are a liability on your balance sheet. A systematically wrong accrual rate does not just annoy employees, it misstates your accounts. Audit the leave settings on every employee once, properly, rather than adjusting balances by hand each time someone queries theirs.

Related Guides

Leave Balances Nobody Trusts?

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Wrong accrual settings compound every pay run and end up misstating a real liability on your balance sheet. Our certified Xero Advisors audit every employee, correct the method, and rebuild the balances properly.

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