# How to transfer leave provision from one company or related entity to another

KB143

### Overview

Sometimes you have two entities and you transfer employees from one to another. If they are different legal entities, then you are effectively terminating and re-employing staff, so the transfer of provision is done using pay runs.

The company that is taking on the new employee may need to recognise their leave entitlement – that is, they will have the same leave in the new company as they did with the old company. This means the new company will be taking on a sudden debt. The process below shows how to account for leave in the new company.

### Process

The process involves two pay runs: one in the old company to remove the provision, and one in the new company to add the provision.

To transfer employee entitlements from company A to company B:

1. Create a pay run in Company A and terminate all relevant staff
   1. On this pay run, remove all pay items (I assume you don’t want them to pay any more)
   2. On the Leave items tab, accrue a NEGATIVE amount of leave so that the projected balance is $0
      1. Click on the leave item and add the negative amount to the Accrued box on the right of the form
   3. Update and apply the pay run
2. At this point, due to this pay run, your leave expenses will have gone down as will have your provision
3. In Company B, create a new pay run and add all these same staff (date as of the date of their last pay run)
   1. Remove all pay items and superannuation
   2. On the leave items tab, manually adjust the Accrued amount to be the same as they had in Company A
      1. Click on the leave item and add the amount to the Accrued box on the right of the form
   3. Update and apply
4. At this point, your provision will have increased as will your leave expenses
   1. If you don’t want your leave expenses to increase for the full provision, you can journal this out against a loan account or similar to Company A (that is, you need to decide who is going to pay for the liability of leave)

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Last edit 16/01/20