The entitlement to payment for annual leave loading is provided for under nearly all modern awards. While most awards prescribe that a loading of The loading is This means the annual leave loading is not calculated on any over award payment. In the absence of a written contract of employment stating that the over award payment includes compensation for annual leave loading, an employer would be liable to pay the annual leave loading at such time that the employee takes annual leave as determined by the applicable modern award or enterprise agreement.
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For an employee who takes all or part of their annual holiday entitlement, the annual holidays are paid at the rate of at least the greater amount of:. Both of these calculations need to be done every time the employee takes annual holidays. They apply to all employees taking entitled annual holidays. If an employee takes a period of annual holidays that covers more than one pay period, even if the employee has agreed to be paid for the annual holidays as part of their normal pay cycle, the calculation for the entire time on annual holidays is still done at the start of the annual holiday, rather than being done each pay period.
However, if the holiday pay is recalculated during the holiday as some payroll systems do and the amount received is greater than would have been received if the calculation was just performed at the start of the annual holiday, this is still compliant.
Annual holidays are paid at the rate of the greater of ordinary weekly pay and average weekly earnings. Ordinary weekly pay is the amount an employee receives under his or her employment agreement for an ordinary working week, including:. Intermittent or one-off payments as well as discretionary payments and employer contributions to superannuation schemes are not included in ordinary weekly pay.
For example, if in each pay period the employee receives commission payments for sales made during the pay period, then these payments would be included in OWP. For many people, ordinary weekly pay is clear because they are paid the same amount for each week they work. Situations where it might not be possible to calculate ordinary weekly pay and the employer may need to use the formula include if the:.
In some situations the employer may need to spend some extra time thinking through and discussing with the employee how the regular payments will be included in ordinary weekly pay. He usually makes two of these sales each week but sometimes he makes more, or less. His commission payments are paid monthly but they do relate to commission he earns on a weekly basis so Erika realises that they should be considered regular payments and should be included in his ordinary weekly pay for the calculation of annual holidays.
This can be a great way to maximise productivity for your business. Keep in mind, though, the Act specifies that the employee must have accumulated the leave to take it. If you pay out leave in advance, the employee will need to build up enough annual leave to cover the advance before they're entitled to more.
Find out when the public holidays land this Christmas. It's up to you and your employees to agree on when they take their annual leave and for how long. The rest of New Zealand is at Alert Level 2. Mediations are being held by phone and video conference in the Auckland region. Employees must be paid the right amount at the right time for holidays and leave. Annual holidays and worked public holidays are paid differently from other types of leave and holidays.
Payment for holidays and leave must be calculated each time the employee goes on holiday or leave as the rate of payment may change even from pay period to pay period. Annual holidays and worked public holidays are paid differently from alternative and unworked public holidays, sick and bereavement leave.
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