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New Zealand Holidays Act in the Spotlight … Again

By The Team | March 15, 2016

Over the last few days a number of high profile articles in the media have cast the spotlight again on Holidays Act compliance. The articles point to problems that have been found in the payment of leave entitlements in the New Zealand Police and the Ministry of Business, Innovation and Employment (MBIE) and have led to further questions by some high profile commentators as to whether these same issues exist in the private sector and to what extent.

What we do know is that the Holidays Act is a complicated piece of legislation and 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).

The detail matters here. 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, the act provides a calculation that 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.

At SmartPayroll, we are well aware of these complexities and Datacom (owners of SmartPayroll) have been in dialogue with MBIE to clarify areas where we see interpretation is required within the act. Over the past years you would have been prompted by us to conduct a leave review on your organisation, or had a pop up wizard guide you through a leave review, to remind you of your obligations with the Holidays Act.

It’s important now that you:

1. Regularly conduct a leave review to look for any changes that might have happened with any employees who have changed the nature of their employment.
2. If you would like support with a leave review, or indeed payroll processes in general, please make contact with the SmartPayroll Helpdesk for further assistance 0800 10 10 38.