Calculating Employee Leaves
Office Leaves for Employers, Employees and Payroll Calculations in New Zealand
This page simplifies the overall Holidays Act of New Zealand, including screenshots and brief explanations about each leave type.
Most payroll companies in New Zealand tend to ignore the requirements of the Act where they base annual leave accrual and consumption in hours or days, instead of weeks, but here at Your Payroll, we let you pick the payment calculations flexible enough for you.
NEW ZEALAND WORK LEAVES
A casual employee is one who has:
▶ come in to fill an absentee's place, or
▶ a contract of fewer than 12 months, or
▶ an irregular work pattern
▶ 8% leave loading calculated on gross taxable earnings is paid out every pay period and must be identifiable (shown on the payslip).
▶ The loading is usually calculated as a separate amount to the hourly rate, however,
▶ The loading may be included in the hourly rate and must be identified.
▶ Casual employees are entitled to sick leaves once they complete a 6-month period of working 10+ hours/week.
Quirks and Issues
4-hour Per Week Employee: For workers who do Saturday morning work each week, or who work regularly but very low hours or very few days per week, this employee should be included in the definition of a casual employee. It is not recommended to make such employee’s permanent when they work only 4 hours per week.
Regular Work Pattern Employee: We have also noted that MBIE appears to regard any regularity as grounds for a casual employee being moved to a permanent contract and leave entitlements, including staff employed on short-term contracts. This doesn’t agree with the provisions of the Act and such employees should be able to remain on a casual basis. The only difference this makes is that under a casual contract the employee receives their leave loading as they go (and they may also be entitled to sick leave, as well as Public Holidays if applicable to their roster or work pattern), rather than receiving their annual leave on termination.
Piece-workers: Employees such as shearers, shed hands, harvesters, fixed-rate per milking dairy workers and so on must have their hours are recorded in order to ascertain that the employee is not paid less than the minimum hourly rate. It is also a requirement that the number of days paid is recorded so that Average Daily Pay can be calculated correctly. If the employee is on a casual contract and works on a Public Holiday then they are entitled to penal rates for the piece-work on that day.
The Holidays Act of 2003 determines that annual leave accrues at a rate of no less than 4 weeks upon completion of 12 months of service.
▶ It does NOT say 160 hours, or 20 days, or 8% as the accrual rate, nor does it say it’s OK to accrue more often (e.g. per pay period).
▶ There are circumstances that accrual may use a different method as long as it genuinely represents the worker’s week AND it must be able to be compared against the minimum requirements of the Act.
Permanent staff are entitled to (minimum):
▶ 4 weeks annual leave accruing on completion of each year of service
▶ 1 week per year may be cashed-up. The payment is taxed using Extra Pay tax rules and does not contribute to Average Weekly Earnings (AWE) or Average Daily Pay (ADP).
Each week, or part thereof, is valued at the time it is taken using the BEST of the following factors:
๏ Ordinary Weekly Earnings (OWE)
‣ For an employee who works irregular hours, the Average Weekly Earnings over the last 4 weeks worked, otherwise
‣ The ordinary weekly earnings based on the employee’s written agreement or normal work pattern
๏ Average Weekly Earnings for the last 52 weeks (excluding approved weeks of absence)
๏ An agreed weekly value (e.g. as per the employee’s written agreement)
➡ If the leave being consumed accrued whilst on Parental Leave or the 12 months following the employee’s return to work from Parental Leave, then the value may be significantly reduced (gross earnings for 12 months / 52)
Permanent staff (and casual staff who work 10+ hours per week for 6 months) are entitled to sick leave as follows:
▶ 5 days (regardless of the employee’s normal days per week!) accrual after 6 months service
▶ A further 5 days each 12 months thereafter
▶ Total accrual may be capped at 20 days (optional)
Other Daily Leave Types
All standard daily leave types (Sick, Public, Bereavement, Alternative, 1st Week ACC) are paid using the same RDP rules.
If it wasn’t a public holiday, would the employee have worked?
NO - Then accrue one alternative fay for each Public Holiday (including any part day) worked
YES - Then pay penal/overtime for time worked
Relevant Daily Pay means:
the value for the day had they been at work and you know what they would have earned (including the value of any potential overtime or allowances), or average daily pay calculated from days paid over the last 52 weeks.
There are two separate entitlements to bereavement leave after six months’ employment:
▶ On the death of an immediate family member, the Act provides for up to three days’ paid leave. This can be taken at any time and for any purpose genuinely relating to the death. Immediate family members are:
‣ the employee’s spouse or partner,
‣ grandchild or
‣ the spouse’s or partner's parent.
Where there is more than one bereavement, the employee is entitled to three days’ bereavement leave in respect of each death.
▶ In the event of a death outside the immediate family that causes a person to suffer bereavement, up to one day’s paid leave may be taken if the employer accepts that the employee has suffered bereavement.
In considering whether a bereavement has occurred, the employer should take into consideration:
‣ how close the association was between the employee and the other person
‣ whether the employee is responsible for any aspects of the ceremonies around the death
‣ whether the employee has any cultural responsibilities they need to fulfil in respect of the death.
If your employee has applied for and been approved parental leave you’ll receive a form showing the commencement and return dates. Simply enter these dates into your system so it knows when to start and stop the parental leave rules from being applied to annual leave that accrues from commencement date until 12 months after the return date (these accruals are valued differently to normal annual leave).
If your employee is terminating and has unused Annual Leave that accrued whilst on Parental Leave we advise paying out the unused value in a separate pay before processing the Final Pay with any residual balance.
HOW WE HELP MEET YOUR OBLIGATIONS
Annual Leave Accruals
Your Payroll accrues annual leave in weeks on each anniversary of employment.
Consuming Annual Leave
Your Payroll utilises the methods described by the Act to provide an accurate valuation of leave at the time it is valued or consumed
‣ Ordinary Weekly Earnings (or 4-week average if the employee is irregular)
‣ Average Weekly Earnings from employee’s pay history
‣ Agreed weekly rate (available in employee’s contract settings)
‣ Caters for leave accrued whilst on Parental Leave
As leave is consumed in weeks the leave assistant provides the means to enter whole or part weeks, or calculate a value (e.g. hours x rate) which will determine the proportion of a week to be debited from the employee’s balance.
A common cause of errors here is when the employer selects an incorrect weekly pay rate, or is using noncompliant leave methods, or has configured their system so as to enable access to pay input fields for all leave entries, or overrides the results obtained via the leave assistant.
▶ Your Payroll provides default values in the employee’s contract settings and overrides in Pay Input so that days paid can be altered on a per pay basis if needed.
▶ Errors in the collection of this data can be easily corrected in the employee’s pay history.
Daily Leave Types
Your Payroll’s default leave methods for sick, public, etc. are in days and are valued according to the provisions of the Act.
Your Payroll displays warnings in the employee’s settings and pay input advising of any issues.
Your Payroll provides basic auditing tools that identify discrepancies between what was paid and the leave recorded as taken. This can occur if records were not accurate at the time the pay was processed, or certain options have been enabled that permit the user to access fields that are generally loaded automatically (unlocking records for manual editing).
▶ Your Payroll endeavours to provide the FREE tools and services, however, we have almost no control over how our software will be used.
▶ We trust the employer will have sufficient knowledge to not make critical errors in processing.
▶ We do not support or condone the use of non-compliant leave methods.
▶ We remain committed to adhering to the requirements of the Act as far as humanly possible and willingly modify the system to accommodate legislative changes and requirements.
*Your Payroll Ltd. acts as a non-representational capacity for our users and attempts to provide operational solutions to payroll problems as they arise. All tax and financial solutions offered are not provided to satisfy any statutory obligations nor is any solution provided as conclusive legal, financial or tax advice.
Keeping track of my employees' payroll used to take me hours, days even, now, I do it in minutes.– R. Burt