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Relevant Daily Pay - Irregular Work Pattern

  • In this article we look at the calculation of Relevant Daily Pay for an employee that works irregular hours.
  • Relevant Daily Pay is a term defined by Section 9 of the Holidays Act 2003 and is used for calculating payment for sick, bereavement, public holidays taken, and alternative holidays taken.
  • Relevant Daily Pay is not used to calculate holiday pay.

Legislation

Section 9(3) specifically provides for employees that have an irregular work pattern. We highlight it below.

Section 9
Meaning of relevant daily pay

(1) In this Act, unless the context otherwise requires, relevant daily pay, for the purposes of calculating payment for a public holiday, alternative holiday, sick leave, or bereavement leave,

(a) means the amount of pay that the employee would have received had the employee worked on the day concerned; and

(b) includes

(i) productivity or incentive-based payments (including commission) if those payments would have otherwise been received on the day concerned:

(ii) payments for overtime if those payments would have otherwise been received on the day concerned:

(iii) the cash value of any board or lodgings provided by the employer to the employee.

(2) To avoid doubt, if subsection (1)(a) is to be applied in the case of a public holiday, the amount of pay does not include any amount that would be added by virtue of section 50.

(3) If it is not possible to determine an employee's relevant daily pay under subsection (1), the pay must be calculated in accordance with the following formula: a div b

where

a

is the employee's gross earnings for

(i) the 4 calendar weeks before the end of the pay period immediately before the calculation is made; or

(ii) if, the employee's normal pay period is longer than 4 weeks, that pay period immediately before the calculation is made

b

is the number of whole or part days during which the employee earned those earnings in the 4 calendar weeks, or longer period (as the case may be) including any day on which the employee was on a paid holiday or paid leave; but excluding any other day on which the employee did not actually work.

(4) However, an employment agreement may specify a special rate of relevant daily pay for the purpose of calculating payment for a public holiday, alternative holiday, sick leave, or bereavement leave if the rate is equal to, or greater than, what would otherwise be calculated under subsection (1) or subsection (3).




The purpose of Section 9(3) is to provide an averaging mechanism for employees that work irregular hours.

What it effectively says is that to arrive at a daily rate you

  • First calculate the gross earnings in the last 28 days.
  • Then divide the gross earnings by the number of calendar days on which the employee was at work.

The result of this calculation becomes the employee's Relevant Daily Pay.

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  • For our example we are paying sick leave.
  • For each of the applicable leave types, the following wizard step is shown.
  • Select Irregular Work Pattern as circled in yellow.
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The following dialog is shown

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Irregular Work Pattern Dialog

In the dialog shown in Step 2 above note the following

Gross Earnings

  • A report of gross earnings in the required 28 days is shown.
  • Note the report link next to each payment. Clicking this link itemises the single payment.

Days Worked

  • Use the Days Worked spin control to select the number of days the employee was at work during the required period.

Daily Rate Calculation

  • The Daily Rate Calculation is updated in response to every change made to the Days Worked spin control.
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How can I enter a part day for the calculation, such as 19.5?

  • You are required to divide the gross earnings by the number of calendar days on which the employee was at work.
  • For every day in the 28 day period, the employee was either at work, or was not at work.
  • If the employee worked 19.5 days, then select 20. That is the number of "whole or part days" the employee worked.
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With the Irregular Work Pattern calculation, what happens in the event of partial days. For example, if the employee has worked 25.5 days, do I divide the gross by 25.5 days, or by 26 days? How can I enter a part day for the calculation, such as 25.5?

This question was recently asked of us by a client who had been told by their employment lawyer that the gross should be divided by 25.5 days. Our understanding of the legislation is that if an employee works any time on a day, it is counted as one whole day for the Irregular Work Pattern calculation.

The client then contacted the Employment Relations Service for clarification. The question as asked by the client was

If an employee works an irregular work pattern and has a day off sick, please can you confirm the calculation of their relevant daily pay from the following information: -

DateGrossDays
01/05/05$1,308.717
08/05/05$1,189.506.5
15/05/05$1,053.006
22/05/05$936.006
Total$4,487.2125.5

Should the RELEVANT DAILY PAY be divisable over 25.5 days or 26 days??

The legislation clearly states in Section 9 (3) b, division 'is the number of whole or part days during which the employee earned those earnings in the 4 calendar weeks, ...'

Our company operates the ACE Payroll system for payment of our clients wages and the system only allows for division under IRREGULAR WORK PATTERN in whole days, not part days. Their interpretation of the legislation is that even if a person only works for one hour on a day, it should be counted as a full day for purposes of calculating their RELEVANT DAILY PAY.

Could you please clarify what the legislation's intention is and reply in writing to my question?

The Employment Relations Service then replied back to our client with the following answer

The Act does not allow for days to be divided into smaller units, therefore if an employee works a part day that is considered to be a whole day for the purposes of the formula for calculating relevant daily pay. Based on the information you have provided in your email, the employee's total gross earnings should be divided by 26 days being the number of whole or part days during which the employee earned those earnings in the 4 calendar weeks before the end of the pay period immediately before the calculation is made.

Anne Naganathan
Information Officer
Employment Relations Service
Department of Labour

Conclusion
  • When working out the relevant daily pay by using the Irregular Work Pattern, you divide the gross by the number of whole or part days worked during the period.
  • While the wording of the Act is possibly not the best, what it is saying is that you count each part or whole day they worked, and the total days worked is the number you divide the gross by.
  • You do NOT use a fraction or a decimal when performing the calculation - every day worked counts as one day, regardless of the number of hours worked.
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Why can't I use the "Irregular Work Pattern" method for holiday pay?

  • The "Irregular Work Pattern" feature documented on this page is written to comply with Section 9(3).
  • Section 9 describes the meaning of "Relevant Daily Pay" which is used "for the purposes of calculating payment for a public holiday, alternative holiday, sick leave, or bereavement leave".
  • "Relevant Daily Pay" does not apply to holiday pay.
  • Holiday Pay is calculated using "Ordinary Weekly Pay" as defined by Section 8.
  • You might like to read our article Holiday Pay - Daily Rates which provides more detail about holiday pay calculation.

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Other leave sections

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