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But annual leave does affect your cash flow. For example:
- If you have a Christmas-New Year closedown, your employees are entitled to be paid for the holidays before they take leave.
- If a closedown includes public holidays, you have to pay staff for any of those days that fall on days they’d normally work.
Although it’s not annual leave if your staff work on a public holiday, it affects cash flow because you have to pay them time and a half, and they’ll also be entitled to a day in lieu if it’s a day they’d normally work.
If you’re unaware of it, another cash flow landmine is that, unless company policy specifically rules it out, staff may exchange up to a week of annual leave for cash each year. You are not allowed to influence this decision.
If a staff member does this, the pay-out will need to be taxed as a lump sum payment, which is somewhat different from PAYE.
You may decide to allow employees to take paid leave in advance, but you should protect your position in writing by ensuring you have their agreement to deduct pay if they fail to make up the outstanding leave.
The key to managing employees’ annual leave is to have full, up-to-date records.
Payslips are a type of record. You don’t have to provide payslips, but your staff have the right to know how you’ve calculated their wages, their annual leave and sick leave, and to see records relating to their hours of work.
Payslips show them the hours they’re being paid for, the amount, allowances, deductions for ACC, KiwiSaver and anything else, and annual leave. Annual leave is a complex area, shown by the fact that it’s often handled by qualified HR personnel.
To find out more about how RightWay can help you, contact us today
Annual leave is a complex area, shown by the fact that it’s often handled by qualified HR personnel.
