Holiday Pay Headaches

Christmas business shut down

Xmas is coming yet again. But before we can swap the keyboard with a glass of wine many of us need to prepare holiday pays for the shut-down. Yes, it’s a headache but one which can be mitigated if you take the time now to plan it.

Whether you use MYOB Payroll, ACE Payroll, IMS Payroll, EXO Payroll or Essentials payroll the legislation surrounding HP is the same.  And you must comply.

​Our tips for processing pays over the shutdown:

  • Run the Holiday pay report mid-December and check leave balances for accuracy. If leave is not shown on payslips, now is a good time to communicate the leave available for each employee. Employees can take any lieu days they have saved as well as their annual leave. We recommend staff complete leave forms.

  • If you shut down for say 3 weeks run 3 individual pays as opposed to one pay of 3 weeks. The tax will be correct and you can schedule the payment to be uploaded to the bank on the right date. This helps your cashflow and will help your employees budget.

  • If some staff work some hours over the shutdown or have extra time off then do a wash-up pay when you return to work.

The legislation in brief

Employees working on a public holiday are entitled to 1.5 times ordinary pay as well as a day in lieu. Only open on public holidays if it makes good economic sense or you have no choice.

Employees get a paid day off on a public holiday if it’s a day they would have normally worked on.

It is very important to calculate the right rate of pay for leave and holidays. Annual holidays are calculated differently from public and alternative holidays, sick and bereavement leave.

Payment for annual annual leave is made at the start of the employee’s holiday and paid at a rate which is the greater of the employee’s ordinary weekly pay or average weekly earnings.

This must be calculated each time the employee goes on leave as the appropriate payment rate may change even from pay period to pay period.

Annual holidays are paid at whichever rate is the higher of:

  • the employee’s ordinary weekly pay at the beginning of the annual holiday, or
  • the employee’s average weekly earnings for the 12 months just before the end of the last pay period before the annual holiday.

Your payroll should work this out for you. Expect to pay a higher rate over shutdown particularly for waged/hourly employees.

Sick leave, bereavement leave, alternative holidays and public holidays are paid at the rate of either relevant daily pay or average daily pay.

Relevant daily pay means paying an employee what they would have earned if they were at work on the day. This also includes payment such as commissions, bonuses & overtime if the employee would have received them on the day. If it’s not possible or not practical to work out relevant daily pay, or because an employee’s daily pay varies in the pay period in question, an employer may use average daily pay.

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!