[EMPLOYMENTNZ] PAY-AS-YOU-GO FOR FIXED-TERM OR CHANGING WORK PATTERNS – PART 1
The right to four weeks’ annual holidays per year applies to all types of employees. In limited circumstances some employees may be paid their annual holiday entitlement on a pay-as-you-go basis.
In limited circumstances some employees may be paid holiday pay at the rate of not less than 8% of their gross earnings with their regular pay instead of being provided with 4 weeks’ annual holidays each year.
This can only be done if:
- the employee is employed on a genuine fixed-term agreement of less than 12 months, or
- the employee works so intermittently or irregularly that it is impractical for the employer to provide them with 4 weeks’ annual holidays.
In both of these situations:
- the employee must agree to it in their employment agreement and
- the 8% gross earnings must be shown as an identifiable component of the employee’s pay.
If annual holidays are paid with regular pay and do not meet the above requirements then the employee remains entitled to 4 weeks’ paid annual holidays in addition to the ‘holiday’ payment they have already received.
Calculating total gross earnings including holiday pay
The formula for calculating gross earnings with holiday pay is:
- Gross earnings (excluding holiday pay) = number of hours x hourly rate.
- Holiday pay = gross earnings (excluding holiday pay) x 0.08.
- Total gross earnings including holiday pay = gross earnings + holiday pay.
Example:
- If an employee works 15 hours a week at an hourly rate of $20, first you must calculate their gross earnings excluding holiday pay. You can do this by multiplying the number of hours worked by the hourly rate (15 x $20 = $300). Their weekly gross earnings excluding holiday pay will be $300.
- To calculate the holiday pay you need to multiply the gross earnings by 8% ($300 x 0.08 = $24). The holiday pay will be $24.
- Their total gross earnings for the week, including the 8% holiday pay, would be the gross earnings plus the holiday pay ($300 + $24 = $324). The total gross earnings including holiday pay will be $324.
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Penny Varley
Payroll Administrator