Employees' entitlements to paid leave
All employees are entitled to paid days off for:
- annual leave
- public holidays
- sick leave
- family violence leave
- bereavement leave
- parental leave
- alternative holidays.
Learn more about leave entitlements
Payment for annual leave
Annual leave is calculated differently to all other types of leave. When an employee is on annual leave, you must pay them either:
- their ordinary weekly pay at the time of the leave, or
- their average weekly earnings over the 12 months before the holiday is taken.
You must pay them whichever amount is higher.
Payment for other leave types and public holidays
For all leave other than annual leave, you must pay your employees either:
- their relevant daily pay, or
- their average daily pay
An employee’s relevant daily pay is the amount they would have earned if they’d worked that day, including:
- productivity or incentive payments, including commission or piece rates
- overtime payments
- the cash value of board and lodgings provided.
An employee’s average daily pay is their gross earnings over the last 52 weeks, divided by the number of whole or part days they either worked or were on paid leave in that period.
You should always try to use the relevant daily pay, unless:
- it’s not possible to work it out
- an employee’s daily pay varies in the pay period in question.
Manage annual holidays - Employment New Zealand
Pay-as-you-go annual leave
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. You can do this if either the employee:
- is on a fixed-term agreement of less than 12 months, or
- works so irregularly that it’s impractical to provide them with four weeks’ annual holidays.
Calculating holiday pay correctly
Calculating holiday pay correctly is straightforward when you’ve got the right systems in place. A good system needs:
- accurate, up-to-date time and wage records
- the correct calculations, using the right data.
If you’re unsure about what you’re doing, seek advice 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.
Common mistakes
Be aware of these common mistakes when calculating holiday pay:
- Not keeping your personnel files updated and using incorrect data to calculate leave payments.
- On public holidays, rostering off staff who would normally work, and not paying them – you must pay any employee who would normally work on a public holiday.
- Setting employees up as casual staff even if their hours aren’t casual, so that you can pay them 8% extra in each pay instead of giving them annual leave.
- Not fully understanding Mondayisation of public holidays, and paying employees incorrectly.
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.
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