AB 1522 originally provided for a single method to calculate the rate to pay employees when they take sick pay. The law specified an average hourly calculation over the prior 90 days. Earlier this year, AB 304 passed which provided another option for employers to use: the regular rate of pay for the workweek. Both calculations have been available in the program, but a new setting provides employers with some additional flexibility in calculating the rates and choosing which one to use.
Originally, the program had a single setting (the Sick Pay Average Rate Lookback Period) which determined whether a 90 day lookback calculation was done or whether the regular rate of pay calculation was done. This calculation was done when you press Ctrl+R on a sick pay line item on the Batch Payroll Check Entry window.
When AB 304 was passed and the new calculation method was added, the law did not state that an employer must choose one calculation or the other and use it exclusively. In fact, there are situations where it is impossible to use the regular rate of pay method. When this is the case, the 90-day lookback calculation is your only choice.
Because of this, we have modified the Calculate Sick Pay Rate window to perform both calculations automatically. When you press Ctrl+R on the Batch Payroll Check window, the Calculate Sick Pay Rate window will now look like this:
Since both calculations are now done automatically, the Calculate button and the other entries that told the program which calculation to perform have been removed.
Both rates will be displayed. Next to each rate is a checkbox; check the box next to the rate that you want to use, then click on the Ok button. The selected rate will be entered on the sick pay line. The Calculate Sick Pay Rate window will automatically select one of the rates to use based on a new setting on the Program Setup:
There are four settings for the Default Sick Pay Rate to use:
- Lookback Period. The average hourly rate for the prior 90 days will be the default rate selected.
- Regular Rate of Pay. The regular rate of pay for the current check will be used for the default rate.
- Higher. The higher of the two rates will be selected as the default.
- Lower. The lower of the two rates will be selected as the default.
Remember, this setting just controls the default rate that is selected on the Calculate Sick Pay Rate. You always have the option of overriding the default rate and selecting the other.
In the latest program update, the Daily Payroll Batch Report will use this setting to calculate the sick pay rate to use when sick pay has been entered into Daily Payroll. This means if the default rate to use is ok, there is no need to edit the rate on the Batch Check Entry after checks have been created as before.
As noted above, there are at least two cases that we know of where the Regular Rate of Pay for the workweek calculation cannot be used. The first is when there are no other wages on the check (only sick pay is being paid to the employee) or when the wages are excluded from the regular rate of pay calculation (for instance, the employee takes the entire week off and uses 3 days of sick pay and 2 days of vacation pay). In these cases, the 90 day lookback calculation must be used to determine the sick pay rate.
The second situation is when an employee that is paid on a piecework basis has rest and recovery periods on their checks. The problem here is that the sick pay rate calculation depends on the wages include the rest and recovery periods. In turn, the calculation for the pay rate for rest and recovery periods does not exclude sick pay, so it depends on the sick pay rate. It is impossible to calculation the rate for either of these pay types without already knowing what the pay rate for the other is. In this situation, the program is designed to use the 90 day lookback calculation to determine the sick pay rate first, then use the results of that calculation to determine the rest and recovery pay rate.
These features will be available in the next update from the Check for Updates option that will be posted over the weekend.