5 Tips to Avoid Holiday Pay Drama

frustration with holiday pay

Are you dreading Friday December 20th and the dreaded holiday pay calculation? Here are some tips to help. Holiday Pay can cause a lot of stress and so learning some simple rules can help smooth the way to better employee relations. 

For example; Annual leave is treated differently from BAPS Leave (Bereavement, Alternative, Public Holiday & Sick Leave). You cannot assume that paying the normal weekly or daily amount will be correct. The way annual leave must be calculated is the higher of; the average weekly rate over the previous 12 months, or the regular weekly rate - whichever is the higher. 

Here are some tips re holiday pays:

  1. Prior to Xmas pays ask all staff for their leave forms. Create a simple Excel sheet summarizing leave days and stat days. Remember if things change to that planned, you can make a correction in the first pay back in January.
  2. Print the leave report at the end of November. Check each person's leave balance and leave rate (does it look normal?)
  3. Check your payroll contains 52 weeks of historical pays for each employee so you're able to calculate the average rate.
  4. Annual Leave, and Bereavement, Sick and Public Holidays are not calculated the same way - get familiar with the rules. Print out the .pdf from MBE attached here and pin to your wall.
  5. If an employee falls sick when they're on holiday, they can request sick leave (yes - true!). Same goes for bereavement leave.

Here are some general tips re payroll record keeping:

  1. Keep accurate records such as leave request forms, sick leave taken, leave without pay taken.  7 years records are required by law and a labour inspector can request records any time.
  2. Make sure all staff have a comprehensive Employment Agreement and update your EA with any changes to the law or any changes to that agreement. A handwritten change will do but ensure it's signed by both parties.
  3. Keep a manual file for each employee. Keep notes of changes there or in your payroll program.
  4. Keep track of hours worked for variable employees. Variable and casual staff must fill in time sheets. These are required by law. 

Here is an excerpt from an excellent article by Jess Logan:

"The purpose of the Holidays Act is to promote a balance between work and employees’ personal lives and provide employees with minimum entitlements to:
  • Annual holidays to provide the opportunity for rest and recreation
  • Public holidays for the observance of days of national, religious, or cultural significance
  • Sick leave to assist employees who are unable to attend work because they’re sick or injured, or because someone who depends on the employee for care is sick or injured
  • Bereavement leave to assist employees who are unable to attend work because they have suffered a bereavement

to read more go to -https://www.myob.com/nz/blog/holiday-pay-why-do-businesses-get-it-wrong/

90% of the calls we get regarding payroll relate to holiday pay. Good record keeping, utilizing a payroll software program, and being up to date with current legislation goes a long way towards having a stress free payroll.

Lynley Averis

Lynley is an MYOB Certified Consultant & has been involved in training in New Zealand since 1985. She's written various accounting & MYOB workbooks including co-authoring “Bookkeeping for Dummies”. She has consulted on all versions of MYOB Accounting, Retail and Payroll over the past 18 years and has previously worked for MYOB. She currently consults to NZ businesses on all aspects of business systems - her mission for clients is for them to spend as little time as possible doing accounting!