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Fact Sheet - Employee holiday entitlements and payment
How many days:
Under the holidays act 2003, employees are entitled to a minimum of 4 weeks annual holidays as paid time off work for rest and recreation after the completion of 12 months continuous employment. Employers can offer more than the minimum 4 weeks. For example: for those in high stress industries or as an incentive to remain in the job (4 weeks increasing to 5 weeks leave per annum after 3 continuous years of service).
The number of days the 4 weeks annual leave represents depends on the employees work pattern.
For permanent employees with a regular work pattern, the calculation is straight forward. e.g. if work 4 days per week, leave entitlement is 16 days.
If the work pattern varies from week to week, the calculation is more complicated. For those on a roster (e.g. 4 days on, 4 days off), a “week” will depend on the days the employee would have been working in the week they want to take holidays.
If the work pattern is unpredictable, a “week” is determined by averaging days over several prior weeks.
Technically an employee is not entitled to paid annual leave until that have completed 12 months service. However, it is common practice to pay employees leave in advance during the first year, at their current hours and pay rate. It is wise to ensure that the amount paid does not exceed the amount the employee would be entitled to as final pay if he terminated his employment on that date the leave commences (i.e. for an employee on 4 weeks annual leave, 8% of his gross taxable earnings year to date.
Three weeks leave must be taken as time ofEmployef work, but an employee can request to cash up the additional week (or weeks). The request must be in writing and can only occur once in a 52-week period. Employers must give the request fair consideration but may decline the request.
Some businesses have implemented an annual closedown. Closedowns are most common during the Christmas holiday period. Closedowns are subject to 14 days’ notice being given, employees may be required to take any annual leave entitlement during this time. If the employer agrees, an employee may take leave in advance of their annual anniversary entitlement.
Payment of the annual holiday is calculated at the time the leave is taken. It must be paid at the higher of
Ordinary weekly pay is the amount an employee is normally paid each week under their employment agreement. Ordinary weekly pay also includes, regular allowance, regular incentive-based payments (e.g. commissions or piece rates), cash value or board or lodgings, regular overtime. Ordinary weekly pay does not include non-taxable allowances as these are expense reimbursements and does not include any discretionary payments such as one-off bonuses as these are not part of the employment agreement.
Where ordinary weekly pay is unclear for any reason, then to work out the ordinary weekly pay, take the gross earnings over the last 4 weeks less any irregular payments such as a bonus or a one-off payment and divide that by 4.
Average weekly earnings are calculated by taking the gross earnings for the last 12 months immediately prior to taking the annual holiday, including any bonuses and commissions as per the employment agreement and dividing that by the number of days worked.
Short Term contracts or casual employees.
Employees who are on a fixed term contract for less than 12 months or whose work is irregular that it is non-viable to provide four weeks annual holidays - i.e. on a casual basis can agree in their employment contracts to have their holiday pay paid as part of their regular pay. This is called “pay as you go”. The calculation for “pay as you go” is normally calculated as an additional 8% on the gross taxable pay in the pay period. It must be identified separately on their payslip. There is therefore no further leave entitlement.
In New Zealand there are currently 11 public holidays each year.
Employee doesn’t work:
If an employee does not work on a public holiday that falls on an otherwise working day for them, you must pay the employee for that day in the pay cycle, as if they had worked as normal on the day. This is calculated at the higher of the employee’s relevant daily pay, or average daily pay.
If an employee is to work on a public holiday that falls on an otherwise working day for them, they are entitled to a minimum of time and a half based on the hours that they work and an alternative holiday. You do not have to pay an employee for an entire day if they work on a public holiday, only for the actual hours worked.
The alternative holiday can be taken at any time that is agreed between the employer and the employee. The alternative holiday should be paid at the higher of the employee’s relevant daily pay or average daily pay at the time the employee takes it. An alternative holiday can be exchanged for a cash payment if it is untaken after 12 months of entitlement arising and both the employer and the employee agree to the cash-up..
Casuals or “filling in”:
Where an employee works on a public holiday and it is not an otherwise working day, or is specifically employed to work only on public holidays (for example, an employee who is employed to work at the racetrack only for the Waitangi Day meeting), there is no entitlement to an alternative holiday, but the employee must still be paid at least time and a half.
Mondayisation of public holidays
If Waitangi Day, ANZAC Day, Christmas Day, Boxing Day, New Year’s Day or the day after New Year’s Day fall on a Saturday or Sunday and that day would not otherwise be a working day for the employee, the holiday is transferred to the following Monday (or Tuesday for Christmas Day, Boxing Day, New Year’s Day and the day after New Year’s Day when they fall on a Sunday) so that the employee still gets a paid day off if the employee would usually work on that day.
If the holiday falls on a Saturday or Sunday and that day would otherwise be a working day for the employee, the holiday remains on the traditional day and the employee is entitled to that day off on pay. This may mean that, depending on how an organisation’s operations are structured, some employees will have public holidays ‘mondayised’ while others will observe them on the day that they fall.
An employee is not entitled to more than four public holidays over the Christmas and New Year period, regardless of their work pattern.
Detailed written records for holiday and other leave entitlements must be kept or maintained for at least 6 years.
There are many complications with annual and public holidays. Each payment should be looked at on a case by case basis. Further information can be found at www.dol.govt.nz or contact us.
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