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New Zealand Holidays Act Compliance: Q & A

By The Team | March 15, 2016

Q: I’ve read the articles about people making incorrect payments for holidays. What’s all the fuss about?

The Holidays Act is a complicated piece of legislation that despite the best intentions from good employers can be difficult to manage and comply with. Complexities typically arise in two areas of the act; the payment calculation rules for annual leave, and the method of calculation for what are known as BAPS leave types (Bereavement, Alternative Holiday, Public Holiday and Sick payments).

For annual leave, the act specifies that leave should be paid at a rate based on the higher of Average Weekly Earnings or Ordinary Weekly Pay. Issues can arise where an employee’s Ordinary Weekly Pay is not well defined. In these situations, a calculation can be used to determine this value.

For BAPS leave, the act specifies that each day of this type of leave should be paid at the Relevant Daily Pay, which is the amount of pay the employee would have received if they had worked the day. Issues can arise where the Relevant Daily Pay is not well defined. In this situation, an alternative calculation can be used to determine the Average Daily Pay which can be used for payment of these leave types.

In both of these areas, issues tend to affect employees that work and are paid irregular hours, or whom receive payments that result in their pays fluctuating between pay periods. For these employees, it’s important to review how Ordinary Weekly Pay is being calculated and whether Relevant Daily Pay is still applicable.

Q: Am I compliant? How can I be sure?

Most probably, but it does depend on how the payroll has been configured for your employees and if there have been any changes to your employees’ working patterns since that configuration was set up.

We recommend regularly reviewing leave setups (say once every quarter) to check that employees working patterns haven’t changed because unfortunately payroll is not something you can just “set and forget”. This is just a timely reminder to do so.

You may recall that in the last couple of years we introduced a leave review wizard into SmartPayroll to encourage you to review leave settings for your employees. We’d recommend conducting this same review again which can be run from the “Company” menu. This is especially important if you have employees that work irregular hours or receive payments that result in their pays varying from pay period to pay period.

If you need help with this review we are more than happy to help you to do this.

Q: Was SmartPayroll involved in the problems at MBIE and NZ Police?

SmartPayroll is not involved in either of these payrolls.