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Holiday Pay - Daily Rates

In this article we examine the calculation of a daily rate for an employee taking holidays after a full years service.

  • We first examine the legislative requirements of the Holidays Act 2003.
  • We then show how Ace Payroll handles those requirements.

Legislation

Section 21 covers the calculation of holiday pay after a full years service.

Section 21
Calculation of annual holiday pay

(1) If an employee takes an annual holiday after the employee's entitlement to the holiday has arisen, the employer must calculate the employee's annual holiday pay in accordance with subsection (2).

(2) Annual holiday pay must be

(a) for the agreed portion of the annual holidays entitlement; and

(b) at a rate that is based on the greater of

(i) the employee's ordinary weekly pay as at the beginning of the annual holiday; or

(ii) the employee's average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holiday.




Ordinary Weekly Pay

Ordinary weekly pay is a term defined by Section 8 and means the greater of

  • An employee's usual pay at the time of taking the holiday, or
  • The employee's average earnings over the previous four weeks.


Summary

The daily rate of an employee taking a holiday requires the comparison of three different rates, and the selection of the greater.

In case you are confused by the above, don't be - Ace Payroll handles the complexity for you.

Ace Payroll Reporting

The following screen is automatically shown by Ace Payroll when paying holiday pay for an employee who is continuing their employment after a full year's service.

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Note the three lines circled in yellow. These are the three calculations required by Section 21.

Annual Average

  • This is the calculation required by Section 21(2)(b)(ii), and is the employee's average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holiday.
  • Pressing the report icon on this line produces a detailed report of the calculation.
  • From the calculation report, there is another report itemising the gross earnings.
  • From the gross earnings report, you can view a past period payslip for every item on the report of gross earnings.

Four Week Average

  • This is the calculation required by Section 8(2) , and represents average earnings over the last four weeks.
  • As above, the report icon allows you to drill down through the various detail.

Current Usual

  • If you have entered a standard pay for the employee, then it is shown here.
  • Again, the calculation is fully itemised by clicking the report icon.

Ace Payroll Data Entry

Enter Days Taken

Confirm Daily Rate

Clicking the Confirm Daily Rate button produces the following screen

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  • Ace Payroll automatically selects the correct rate by itself.
  • Click GO to accept the suggested daily rate.
  • You can overwrite the suggested rate with a value of your choice.
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Using the Annual Leave method, why is no current usual daily rate shown?

  • For salaried staff, the Current Usual Daily Rate is the salary each pay period divided by the number of days worked each pay period.
  • For hourly employees, the Current Usual Daily Rate is calculated based on the usual number of hours the employee works each pay period. If you do not have a usual number of hours entered, Ace Payroll cannot calculate a Current Usual Daily Rate.
  • To load Usual Hours for an employee, go to Calculate Pays then choose an employee. Enter hours in the Usual Pay column which is on the right side of the Pay Calculation screen.

More on public holidays

Public Holiday Entitlements
Ace Payroll receives many calls immediately after every public holiday, asking whether a particular employee is entitled to be paid for the public holiday more..
Public Holiday Taken
Use this method for an employee who did not work on the public holiday, but would have worked had the day not been a public holiday more..
Public Holiday Worked
Use this method for an employee who works at any time on a public holiday more..
Public Holiday Calendar
A facility in Ace Payroll to check when public holidays fall in this and future years more..
Christmas and New Year 2016/2017
Working out public holiday entitlements during the 2016/2017 Christmas and New Year holiday period more..
Easter Sunday
Easter Sunday is not a public holiday, but shops cannot open more..
Easter Holidays 2016
The dates of Good Friday and Easter Monday this year more..
Waitangi Day
Waitangi Day commemorates the signing of a treaty at Waitangi on 6 February 1840 more..
Anzac Day
Anzac Day is held on 25 April each year to commemorate New Zealanders killed in war more..
Queen's Birthday
The Queen's Birthday is always observed in New Zealand on the first Monday in June more..
Labour Day
Labour Day is always observed on the 4th Monday in October more..
Southland Anniversary Day
Southland Anniversary Day is always on Easter Tuesday more..
Default Provincial Anniversary Day
Select the provincial anniversary day observed by the majority of your employees to make it the default more..
Payment For Sick Leave If Taken On A Public Holiday
You are not required to pay your staff time and a half if they call in sick on a public holiday they would have otherwise worked more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..
Ace Payroll Frequently Asked Questions
All the most common questions we are asked at Ace Payroll listed in a question format and grouped by category more..

More on holiday pays

Cashing Up Holiday Pay
From 1st April 2011 it is legal for an employee to cash up to one weeks annual leave each year more..
Understanding Termination Accruals
Handling of accrued holiday pay upon termination can be confusing. Ace Payroll explains the concept of accruals and demonstrates how termination pay is calculated more..
Holiday 52 Week History
It is not absolutely necessary to enter a full 52 week earnings history for correct holiday pay calculation more..
Holiday Pay - Daily Rates
An explanation of the calculation of a daily rate for an employee taking holidays after a full years service more..
Leave Calendar
Use the leave calendar to record actual dates taken for leave more..
Employee Leave Profile
The employee leave profile records which are the normal days worked by an employee more..
Casual Holiday Each Pay
This tutorial shows how to have Ace Payroll automatically pay a casual employee 8% holiday pay every time they are paid more..
Taxation of Holiday Pay
This article shows how easy it is to tax holiday pay according to IRD requirements more..
Annual Compulsory Closedowns
An annual compulsory closedown is where a business traditionally closes down for a number of weeks each year, usually over Christmas more..
Changing Holiday From 8% Each Pay
The procedure for changing a casual employee over to being a permanent employee in Ace Payroll for holiday pay purposes more..
Termination Holiday 8% Part Year Payment
How to pay the 8% of part year gross for an employee who has been employed for more than a year, receives four weeks holidays a year, and is terminating their employment more..
ERS Holiday Pay FAQ's
A selection of holiday pay FAQ's from the Employment Relations Service more..
Holidays 4 to 5 Weeks
How to manually change an employee from 4 to 5 weeks annual leave more..
Holiday Pay Miscellaneous
The reason why only full days holiday pay owing is shown on payslips rather than fractional days more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..
Ace Payroll Frequently Asked Questions
All the most common questions we are asked at Ace Payroll listed in a question format and grouped by category more..

Other leave sections

Public Holiday Entitlements
Ace Payroll receives many calls immediately after every public holiday, asking whether a particular employee is entitled to be paid for the public holiday more..
Public Holiday Taken
Use this method for an employee who did not work on the public holiday, but would have worked had the day not been a public holiday more..
Public Holiday Worked
Use this method for an employee who works at any time on a public holiday more..
Alternative Holidays
An Alternative Holiday is a day an employee is entitled to take off as paid leave, in return for having worked on a public holiday more..
Annual Holiday Entitlements
This article looks at entitlements to holidays as provided for by the Holidays Act more..
Annual Holiday Payments
This tutorial shows how to record holiday pay taken using the Annual Leave method more..
Sick Leave
Entitlements to sick leave as provided for by the Holidays Act more..
Bereavement Leave
Entitlements to bereavement leave as provided for by the Holidays Act more..
Time Bank
The time bank feature allows for the accumulation of hourly leave outside the legal requirements of the Holidays Act more..
Irregular Work Pattern
In this article we look at the calculation of Relevant Daily Pay for an employee that works irregular hours more..
Leave Owing Report
The Leave Owing report provides an estimate of holiday pay owing to all staff at a selected date more..
Holidays Act 2003
The full text of the Holidays Act 2003 more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..
Ace Payroll Frequently Asked Questions
All the most common questions we are asked at Ace Payroll listed in a question format and grouped by category more..