In this blog we dig into:
- Annual leave entitlements ✔️
- Navigating closedown periods ✔️
- What to do if your business is working through ✔️
- How to work through entitlements for employees who work on roster systems ✔️
- Public holidays ✔️
Let’s start by defining what Annual Holiday Pay really is
Annual Holiday Pay is sometimes known as holiday pay and annual leave. However as the Holidays Act 2003 only refers to Annual Holiday Pay, we are going to stick with that terminology in this blog.
- Annual Holiday Pay is a value calculated at 8% of gross earnings accrued in every 12 month period.
- Annual Holiday pay is defined as an ‘entitlement’ AFTER 12 months continued employment.
- Annual Holiday Pay in advance refers to the provision in the Act for an employee and employer to agree to pay a value of Annual Holiday Pay prior to the completion of any 12 month period.
- Every employee who has worked for more than a 12 month period, therefore has their current entitlements (earned from the previous 12 months) and their accruing leave value being earned in the current 12 month period.
Negotiating Close Down Periods
If a business has a regular closedown period, generally this should be written into the employment agreement prior to the employee starting work.
If your business doesn’t usually have an annual closedown period, but you are thinking about implementing it this holiday season, there are a number of things you need to consider.
First, check your individual employment agreements (IEAs) to see what is stated.
- Do they allow for an annual closedown?
- If so, do they have a provision allowing the employer to be able to pay annual leave in advance for employees who haven’t yet completed 12 months continuous service?
If you have clauses in your IEA that gives guidance on closedown procedures, ensure you follow those guidelines.
If you don’t have these clauses, you must:
- Give your employees as much notice as possible that you are thinking about a closedown period and advise them of potential dates.
- Once you have decided to implement a closedown period, you must confirm this in writing to your employees not less than 14 days prior to the closedown commencement date.
Please note that a business may only invoke one closedown period in any 12-month timeframe.
For more information please visit Closedowns (employment.govt.nz)
So, what do you do if you have chosen to implement a closedown period and you have employees working for you who are in their first 12 months of employment with the company?
In this instance employees who have not completed their 12 months continuous service must be paid 8% of their gross earnings since the commencement of their employment (defined as Annual Holiday Pay in advance).
If the employee has not earnt enough leave to cover the period required, you can choose to either:
- Let the employee take their leave in advance – therefore allowing the employee to go into negative leave owing.
- Let the employee take the additional leave us unpaid.
If considering option 1) be sure that this option is sustainable for your business and only applies to a minimum number of employees, otherwise if they choose to leave soon after the closedown period, they may end their employment owing you money.
What happens if my employee has completed their 12 months continuous service but has all used all their current entitlements (from the previous 12 month period)?
In this instance, you may
- Agree to pay some of their accruing leave value from the current 12 month period in advance, (also Annual Holiday Pay in advance).
- Let the employee take the additional leave us unpaid.
This decision is at your discretion 👍
Navigating public holidays
Employees on Roster and variable hours: Determining what would be an otherwise working day.
When employees work variable hours and days, it can sometimes be tricky to work out who is entitled to Public Holiday payments.
When working out if an employee has entitlement, you need to consider the following:
- What is stated in the IEA?
- The employee’s work patterns.
- Other relevant factors including:
a) If the employee works only when work is available.
b) your rostering system.
c) ‘reasonable’ expectations from both parties that the employee would usually work that day.
The most practical way to do this is to work out a percentage value by reviewing the past 13 weeks to see if the employee worked on that day. If for seven of the 13 weeks (53%), the employee did work that day, then they are entitled to the payment. If the reverse is true and they only worked that day six times in the past 13 weeks (46%), then they are not entitled to the payment.
If your business is highly seasonal or for some reason 13 weeks doesn’t accurately reflect the ‘usual’ pattern of work for the employee, then review all 52 weeks to assist in providing a clear answer.
Continuing Business Over the Holiday Season
If your business will continue to operate during the Christmas period, you need to be prepared with sufficient notice to employees as to which Public Holiday dates they may be required to work (if any).
Paying staff over the 2021/2022 Christmas break
If you outsource payroll to RightWay or any other service provider, be aware that Monday 27 and Tuesday 28 December 2021 and Monday 3 and Tues 4 January 2022 are Public Holidays, so you will need to get wage and time records to your payroll specialist by Friday 24 and Friday 31 December 2021, respectively.
Budgeting for changed payroll processing days is essential in planning for your Christmas cashflow requirements. With this in mind please be aware that if you manage payroll in-house and pay your staff weekly, there are two wage payments that will need to be processed in the week before Christmas 2021, as banks do not process payments on public holidays or weekends.
For example, if you normally pay wages on a Tuesday, you will need to process a payment on Tuesday 21st December for the week previous (13th Dec- 19th Dec), then again on Friday 24th Dec for that week (20th -26th Dec). The week following Christmas would also be a Friday payday, on the 31st for the week of 27th Dec- 2nd Jan, then the next payday will be back to normal- as in the Tuesday following a full previous week’s work, which will be the 11th Jan 2022.
It’s a great move to give your employees the heads up about this sooner rather than later so they can budget for it.
For further information regarding employees’ public holiday entitlements please visit:
- Public holidays » Employment New Zealand
- Public holidays falling on a weekend » Employment New Zealand
Additionally, if you are intending on providing a staff bonus, please be aware that it is subject to PAYE.
If you would like further assistance with your HR or bookkeeping needs, please get in touchPlease note that this article deals with broad aspects of the Holidays Act 2003 and is not intended as a substitute for the Holidays Act 2003 nor should this content be looked upon as ‘specific’ professional advice. For further details on this topic please visit Leave and holidays » Employment New Zealand