Holiday pay entitlements, by Rhonda Roberts & Nicki Hepi

By law, all employees are entitled to a minimum of four weeks paid annual leave after 12 months continuous employment. Three weeks leave must be taken as time off work but employees can cash-up the fourth week’s entitlement.

Businesses with an annual closedown must give 14 days' notice to employees, who may be required to take annual leave during this time.

The number of actual days the four weeks annual leave represents depends on the employees’ work pattern i.e. are they full time, part-time, on a regular roster or an irregular reliever?

The rate of payment for the annual holiday is calculated at the time the leave is taken and it must be paid at the higher of;

• the employee’s ordinary weekly pay at the beginning of the holiday. This is the amount normally paid under the employment agreement, including regular overtime, commissions/bonuses and the cash value of lodgings. If the amount is unclear, it can be calculated based on the wages or salary of the four prior weeks
• the employee’s average daily pay of the 12 months before taking the holiday.

In certain circumstances, employees on fixed term contracts for less than 12 months, or whose work is so irregular that it is not viable to provide four weeks annual leave, may have a holiday pay “pay as you go” clause included in their employment contract. This is normally calculated as an additional 8% of the gross taxable pay for the pay period and must be identified separately on the payslip. This negates further annual leave entitlement.

New Zealand now has 12 annual public holidays, with Matariki added earlier this year.

If an employee does not work on a public holiday that falls on an “otherwise working day” they must be paid for that day, as if they had worked on that day. This is calculated at the higher of the employee’s relevant daily pay, or average daily pay.

If an employee works 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 actual hours worked and a full alternative days’ holiday. 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. If an alternative days’ leave is not taken after 12 months of entitlement it may be cashed up, subject to agreement between employer and employee. 

Where an employee works on a public holiday which is not an “otherwise working day”, or is specifically employed to work only on public holidays there is no entitlement to an alternative holiday, but the employee must still be paid at least time-and-a-half their normal rate.

With many businesses open more than five days per week, the ‘Mondayisation’ of public holidays can be confusing over which day is the public holiday. Remember, 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 six years.

A more detailed article is available on www.pkffa.co.nz and www.employment.govt.nz also has more information.