How does Parental leave affect the entitlement to Annual Holidays?

The Holidays Act 2003 states that an employee is eligible for Annual leave after 12 months of continuous employment. Time on Parental leave is included in this period of continuous employment.

When an employee returns to work after a period of Parental Leave any annual holidays taken is paid at the rate of the employee’s average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holiday. This rule applies for 12 months commencing when the employee returns to work after their period of Parental leave.

This differs from the normal way of paying annual leave which is at the greater of the Ordinary Weekly pay or the Average Weekly earnings. In effect an employee returning to work after taking parental leave could be paid at a rate that is lower than their ordinary weekly pay (eg usual rate is $18 per hr, leave rate may calculate to be $7 per hour)

Currently MYOB Payroll does not recognise when an employee starts and returns from Parental leave. Therefore the system calculated annual leave rate needs to be manually overwritten to enter the rate.

To do this go to Maintenance then Maintain Paycodes. Select the Annual Holidays Paycode and tick the option “Allow rate to be Modified…”

When entering a pay with annual leave the Leave button can be selected to see what the average rate weekly rate is. This can then be divided by the normal hours per week to derive an Annual Holiday rate. This is then manually entered against the Annual Holiday code.

Check this article for the accrual of annual holidays whilst on parental leave –

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!