Preparing For The Holiday Season

About the Author:

Paul Wilton (editor)

CA with degrees in commerce, accounting and information technology. Paul worked overseas in the “Big 4” accounting firms and served as a director at Audit New Zealand before setting up his own consultancy. Author of A-Z of New Zealand Business Law, Paul has over 20 years of experience as a business owner and consultant. He joined FBA in 2004 and is totally committed to providing excellence in quality and value to our subscribers. 

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PREPARING FOR THE HOLIDAY SEASON

The media has reported cases in the past few years of staff being underpaid for holidays and the Government has promised to simplify the Holidays Act. 

It does not help that there are two ways to calculate holiday pay - either on the basis of ordinary weekly pay or an employee's average weekly earnings over the past 12 months. In brief, employers must pay whatever gives the employee the most money.

Here, we remind you of your obligations for the upcoming Holiday Season.

Public Holiday Dates

Christmas and Boxing Day, Friday 25th and Saturday 26th December 2020.

New Year’s Day and the day after, Friday 1st and Saturday 2nd January 2021.

Because Boxing Day and the Day after New Year fall on the weekend, the public holiday is treated as falling on the Monday, but only if Saturday is not normally a working day for the employee. If the employee normally works Saturday, then the public holiday rules are applied to the Saturday only.

Anniversary Days by region 

(Dates actually observed and not the official dates): 

Auckland	Mon, 1 February		Nelson	Mon, 1 February
Buller	Mon, 1 February		Northland	Mon, 1 February
Canterbury	Fri, 12 November		Otago	Mon, 22 March
Canterbury (South)	Mon, 27 September		Southland	Tue, 6 April
Chatham Islands	Mon, 29 November		Taranaki	Mon, 8 March
Hawke’s Bay	Fri, 22 October		Wellington	Mon, 25 January
Marlborough	Mon, 1 November		Westland	29 November

Employers and employees may agree in writing to transfer the observance of a public holiday to another working day to meet the needs of the business or the employee.

An employee can be required to work on a public holiday only if the individual would otherwise have worked on that day and if the employment agreement requires the person to work on public holidays.

In all other circumstances, employees need only work on a public holiday if they agree to do so and this should be recorded in writing.

Public Holiday Pay

An employee must be paid for a day off on a public holiday if it falls on a day that the employee would otherwise have worked.

Payment must be made in the pay that relates to the pay period in which the holiday falls.

Employees who work on a Public Holiday are entitled to 1.5 times ordinary pay for that day (or more if agreed), as well as a ‘Day in Lieu’ (being any other day, as a day’s paid Annual Leave). This means that they can take another day as a holiday and be paid for it.

You cannot contract out of this requirement, even if you offer to pay double or triple pay for working on a Public Holiday.

If there is a public holiday when employees are on annual leave, they get paid for the public holiday if they would normally have worked on that day, and do not lose an annual leave day.

Part-time worker example:

Haley normally works 5 hours each day on Monday and Saturday of every week. 

Over the holiday period, she works only on Friday, 25 December (not normally a working day), Saturday 26 December (Boxing Day) and on Monday, 4 January 2021, but not on 1 or 2 January. She is entitled to:

• 5 hours pay at x 1.5 for working on Christmas Day, a public holiday, but no deferred day's leave as she does not normally work on a Friday.

• 5 hours pay at x 1.5, as well as 5 hours deferred leave on a future working day for working on Boxing Day (Saturday), which is observed for her on that day as she normally works on a Saturday. 

• No pay for 1 January because she does not normally work on a Friday and does not work on the public holiday. 

• 5 hour’s pay for the Saturday that she does not work on the Public Holiday of 2 January. 

• Normal pay for Monday, 4 January, as her public holiday is observed on 2 January when she normally works.

Note: If Haley does not normally work on a Saturday, she would be entitled to her normal rate for working on Boxing Day and also be paid her normal rate for the day off on Monday 28 December, as the public holiday would be observed on the Monday. She would not be paid for 2 January, but would receive time and a half plus a day off in lieu for working on Monday 4 January.

Days in lieu that have not been taken within 12 months of the days being “earned” may be “cashed up”, but only if this is mutually acceptable to the employer and employee.

Annual Holiday Pay

Employees are entitled to a minimum of 4 weeks pay for every 12 months of service. A week's Holiday Pay for annual leave is the greater of:

• The average weekly gross earnings i.e. everything that the employer was required to pay for that employee over the year (including all overtime, but excluding payments made for ACC compensation, cashed out minimum-entitlement holidays and voluntary military service); and

• The current ordinary weekly pay at the time the leave is taken. This includes all regular payments. It excludes irregular overtime, one- off or intermittent payments, discretionary (not required to pay) payments and employer contributions to superannuation schemes.

Reimbursements for expenses are excluded unless otherwise stated in the employee agreement. Holiday Pay must be paid to the employee before they take leave, unless the employer and employee agree in writing that the normal pay cycle will continue undisturbed during the holiday. In either case, the holiday pay calculation must be done as at the start of the annual holiday as average gross weekly pay, for example, can change while the employee is on leave.

Cashing up Annual Leave

An employee may request in writing to be paid in cash for up to one week’s annual leave per year and this may be granted by the employer. The request must be considered within a reasonable time and may be declined. The employee must be advised of the decision in writing and no reason is required to be given. If granted, the payment must be at least the same as if the employee had taken the holidays and must be paid as soon as practical – usually the next pay day. An employer cannot pressure an employee into cashing up holidays.

Casual Staff

Casual employees are not entitled to annual leave.  Instead, they receive 8% over and above their gross earnings for every 12 month's continuous service.  If they agreed to be paid the 8% on a pay as you go basis on each pay day, then they are not entitled to extra holiday pay after 12 months or in the event of a business close down. If they have not been paid on a pay as you go basis, and the business has a close- down period, then they are entitled to 8% of their gross earnings, less any payments already made from that amount.

For public holidays, if it is clear that a casual employee would have worked on that day (had it not been a public holiday), then they are entitled to be paid for that public holiday just like any other employee. 

With casual staff, it is crucial to keep an eye on their hours. If a regular pattern has formed, then they could lose their status as a casual employee and become either a full- or part-time employee.

Entertainment Tax

There has been no change to the entertainment tax regime this year and the details can be found in your Quick Reference Guide. Please contact us through our Q&A service if you have any questions relating to these issues.

We wish you safe and happy holidays and a prosperous 2021.

FBA Editor

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