Working out what you need to pay employees when they’re taking leave can be complicated — but with the right systems and processes in place, it doesn’t have to be difficult.
All employees are entitled to paid days off for:
You can decide whether or not to pay them for things like:
Annual leave is calculated differently to all other types of leave. When an employee is on annual leave, you must pay them:
You must pay them whichever amount is higher.
Calculating leave payments (external link) - Employment New Zealand
For all leave other than annual leave, you must pay your employees either:
You should always try to use the relevant daily pay, unless there’s a reason it’s too hard to work out.
MBIE has a calculator to help you work out whether you need to pay relevant daily pay or average daily pay (external link) .
Casual employees can choose to receive an extra 8% pay rather than holiday leave or sick leave. If they take that option, calculate PAYE on that amount as usual. Make sure that the value of the 8% is more than the value of holiday pay, if they took it.
Annual leave for casual staff (external link) - Employment New Zealand
Calculating holiday pay correctly is straightforward when you’ve got the right systems in place. A good system needs:
Use the MBIE calculator (external link) to work out what an employee’s average daily pay should be.
If you feel unsure about what you’re doing, it’s worth getting guidance from a payroll specialist who can help you set up a good system.
Public holidays are the most tricky — make sure you understand how they work and what your employees are entitled to.
To get holiday pay calculations right, don’t fall into these common traps:
In general, if you’re keeping your time and wage records up to date and entering the right data, your calculations should be correct. If your employees work standard hours, their leave payments should be standard, too. If they work irregular hours, their leave payments should fluctuate.