A world of knowledge lies below.

Who is entitled to holiday payments?

Any employee of a New Zealand business is entitled to receive payment when they take leave, under the Holidays Act 2003. Leave types include annual holidays (sometimes referred to as annual leave), bereavement, sick, alternate day, public holidays and domestic violence leave. There may be other leave types specified in an employment contract specific to an employer. Employees include full time, part time, fixed term and ‘casual’ workers (in some cases). Independent contractors are not entitled to holiday pay.

An employment contract should detail any entitlements, but have a minimum entitlement to four weeks’ paid annual holidays off work for rest and recreation after 12 months’ continuous employment with an employer (though an employer can agree to give an employee more). The intent is that, if an employee took all of their entitlement in one year, they would have had a total of (at least) four calendar weeks off work.

There are various other entitlements for the other types of leave (bereavement, sick, alternate and domestic violence leave).

How do I calculate holiday payments?

The Holiday's Act 2003 specifies the calculations for the various leave types. For annual leave payments, there are multiple different calculations that need to be undertaken. These include the Ordinary Weekly Pay and the Average Weekly Earnings.

When it isn't possible to work out the Ordinary Weekly Pay, a four week average calculation must be used (sometime referred to as 'ORD4').

For DBAPS (Domestic Violence leave, Bereavement, Public Holidays, Alternate Day, Sick leave), there are also multiple different calculations to determine the payment required. These include Relevant Daily Pay and Average Daily Pay. (swap the order since it is RDP first and if not practicable ADP)

You can read more about these calculations on the Employment NZ website.

ResolvePay specialise in assisting you with undertaking these calculations. Get in touch to find out more.

What is the ResolvePay process for solving holiday pay issues?

ResolvePay's core focus is on assisting employers to understand their potential liability in respect of the Holiday's Act, and to assist with the recalculations required to remediate any liability.

The first step in ResolvePay's process is to complete an audit of the current state, reviewing how the payroll is configured in respect of the Holiday's Act requirements and the alignment to employee contracts.

Once complete, the second step is to undertake recalculations for the relevant employee groups.

For more information on what happens in more detail at each step, please get in touch with us today.

What is my responsibility as an employer?

It is the employer’s legal duty to make sure their employees’ holiday and leave entitlements that are set out in the Act – along with the payment for these entitlements – are correct and meet minimum employment standards. Employers cannot contract out of their responsibilities under the Act, even if employees agree.

Employers are free to choose the work arrangements that best suit their business objectives, consistent with the law, but should also recognise that complicated pay and/or variable or unpredictable work arrangements are likely to increase the time and cost of complying with the Act.

To ensure compliance with minimum standards and other legal obligations, the employers are required to engage with their employees and their payroll staff or provider on an ongoing basis – taking a ‘set and forget’ or a ‘one size fits all’ approach to payroll carries a high risk of non-compliance.

What is the Holiday's Act 2003?

The Holidays Act (2003) is the central piece of legislation that outlines leave entitlements to employees in New Zealand.

Included in the Act is the approach to calculate and pay employees for holiday, sick, bereavement, alternate, public holiday entitlements or any other leave taken.

Any business who employs people in New Zealand is bound to the legislation within this Act.

A link to the full Holiday's Act can be found here.

When will the Holiday's Act 2003 be fixed or changed?

The Government established a Taskforce to review and provide recommendations to improve the Holidays Act. The Taskforce has reported back to the Minister for Workplace Relations and Safety, who is now considering the recommendations. The Taskforce included employer, worker and government representatives and was chaired by Gordon Anderson, a law professor at Victoria University with extensive experience in employment law. The review of the Act was commissioned by the Government following a joint request from unions and employers.

In August 2018, the Taskforce published an issues paper that set out its understanding of the key issues that employers, employees, and payroll providers face in trying to implement the Holidays Act 2003. The Taskforce considered feedback from stakeholders on the issues paper as it developed its final recommendations.

In December 2018 the Taskforce provided an interim report to the Minister for Workplace Relations and Safety on progress with the review of the Holidays Act.

The final review is pending and at this stage no date has been indicated as to when the final will be complete and if or when any changes will be made.

Should the Act be reviewed, the changes won't be applied retrospectively. This means that current requirements must be complied with, regardless of any foreseeable changes.

For more information see here.

How far back do I have to undertake calculations for my employees?

Under the current legislation, employers are only obliged to make repayments regarding the last six years of non-compliance. That’s the legal obligation, but some companies have gone above and beyond.

To undertake calculations, we require one year's historical data from the date of the calculation (e.g. if calculating on 10 March 2010, we need the previous year's information back to 10 March 2009). Therefore, in undertaking calculations, you will need 7 years of data to complete 6 years of calculations.

I'm an employee and I think I have an issue with my holiday pay. How do I know and what can I do?

There are some basic calculations you can take using the guidance found on the Employment NZ's website.

You can also ask your employer if they have or are looking at holiday pay issues.

There are a few questions that if you answer yes to, may indicate a possible issue with holiday pay.

Firstly, when you take leave, do you receive payment that is similar to what you get paid when you normally work? If yes, then it is likely you do NOT have an issue with holiday pay.

If your answer is no (i.e. your payment is less than/different to what you would have expected to receive), consider the questions below:

• Do you work irregular hours each week? (e.g. 22 hours one week, 34 hours next week, 17 hours following week)
• Do you have irregular working patterns (e.g. 2 weeks on, 1 week off)
• Do you receive regular allowances?
• Do you receive regular commissions or bonuses?
• Have you changed your working pattern any time over the last 7 years? (e.g. full time, part time)

If you answer yes to any of the above questions, you may have a possible issue with holiday pay. We suggest you talk to your employer in the first instance. If this doesn’t fix the problem, you can speak to your union representative, contact Employment NZ. or seek legal advice.

I'm an employee and I think I have an issue with my holiday pay. Can you help?

We specialise in helping employers solve their holiday pay issues. If you think you have an issue, we suggest speaking with your employer, union or employment lawyer in the first instance.

How will COVID-19 affect my holiday pay requirements?

This depends on how your business is operating under the lockdown alert levels.

If you have negotiated with your employees to reduce their hours, reduce their salary or wages, or to take unpaid leave, you will need to update your payroll system accordingly.

You cannot force an employee to reduce their hours, salary or to take leave. This would be in breach of the Holiday's Act. Any proposal of taking leave must be negotiated and agreed with each employee. Employers and employees may agree that the employee will take leave, or, alternatively, an employer is able to give 14 days' notice and direct employees to take leave.

If there is any uncertainty as to whether annual leave has been forced on an employee, we recommend that specific advice is sought.

If you have applied for the wage subsidy and have paid this to your employees, you are still required to process this through payroll. Whether or not the employer decides to apply for the wage subsidy cannot be conditional on the employee taking annual leave. Employees will still accrue annual leave over the duration of the wage subsidy (12 weeks) so employers need to consider this leave liability.

The wage subsidy also affects the employer's obligations under the Holidays Act. Employers are not able to contract out of the Holidays Act by making an alternative agreement with their employees, even in these exceptional times.

Once an employer and employee have agreed that the employee's wage will decrease, the newly agreed wage then becomes that employee's Relevant Daily Pay.

This is what employees can expect to receive as their everyday remuneration (e.g. if a full time employee is only receiving the wage subsidy, the relevant daily pay would be $177.16 being the weekly wage subsidy of $585.80 divided by 5).

Under the Holidays Act, this Relevant Daily Pay is used to calculate an employee's sick leave, bereavement leave and public holiday pay.

For example, a full-time employee is working from home Monday - Friday with 80 per cent reduced pay and 80 per cent reduced hours.

How does reducing my employee's hours affect my holiday pay responsibilities?

Your employees must agree to any changes to their normal working arrangements. Before you have the conversation, see the advice on the Employment New Zealand website. If you reduce your employee's hours (e.g. to 80% / from 5 days to 4 days) you will need to ensure this is updated within your payroll system. Once an employer and employee have agreed that the employee's wage will decrease, the newly agreed wage then becomes that employee's Relevant Daily Pay.

To record changes to an employee’s hours:

• If the changes are temporary, you can adjust them on their draft payslip or in their timesheet.
• If the changes are permanent, you need to record these changes in the relevant employee section within your payroll before you process your pay run.

It’s good practice to make a note on the payslip or in their employment details stating the change and why it’s occurred.

We advise speaking with your payroll provider if you are uncertain about making any of these changes.