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:
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
Annual holidays entitlements(external link) — Employment NZ
For all leave other than annual leave, you must pay your employees either:
You should always try to use the relevant daily pay, unless:
Employment New Zealand has a calculator to help you work out whether you need to pay relevant daily pay or average daily pay(external link).
Instead of four weeks’ annual leave, you can pay your employees on a pay-as-you-go basis at a minimum rate of 8% of their gross earnings if:
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 Employment New Zealand 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 have varying rules — 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.
Mondayisation(external link) — Employment New Zealand