Staff leave payments

17 March 2020

David Browne2To many people it would seem there isn’t too much that schools, the corrections department, fast food restaurants, and the Ministry of Business, Innovation and Employment would have in common with each other.  They are diverse group of entities serving different functions in society.  On the other hand, as employers there is one thing they do share in common; they have employees.  Employees of course have entitlements including the right to paid leave and it is this which is the link between the organisations listed.  More specifically, all these employers are part of a ‘club’ which got staff leave payments wrong and as a result had to pay up millions of dollars to make it right.

How that it all went wrong is different in each case, but from what we understand software may have been involved.  The businesses were using various computer programmes or apps to help them sort out their payroll.  Such programmes are considered to be essential in larger organisations with hundreds of staff.  However, apparently not all of the packages may have managed to convert the already complicated Holidays Act into useful code that aligns with obligations under employment law and others may have been used incorrectly.

The outcome of the long-awaited review of the Holidays Act and recommendations for law reform has been delayed. As a result, employers may be stuck with the current law for some time to come.  A law which some complain is dated, conceiving of the workforce as still grounded largely in the 9 to 5 work week where life proceeds in a regular pattern, which of course it doesn’t and hasn’t since the advent of the world wide web, email and computers.  In the meantime, we recommend employers check the work of any software package used to ensure it has made the calculation correctly.

To achieve this, it may help to think of it as a maths solution from school where the teacher asked students to “show” or prove the sum derived at.  Conducting a check and having the proof handy will also facilitate discussion with the employee should they raise a concern with their pays.

For example, consider the situation where the employer is calculating annual leave.  On the face of it that should be strait forward, especially for salaried staff who take a week of annul leave.  In that situation, the employee would normally expect to receive their weekly salary while off work.  Such an approach would be in keeping with the well accepted Ordinary Weekly Pay method of calculating the payment.  The situation becomes more complicated when the employee earns a wage and works a changing roster and is paid various sums over the course of the year.  Where the employee’s wages fluctuate the employer must calculate both the Ordinary Weekly Pay and the employee’s Average Weekly Earnings and then pay the greater of the two.

Doing that is not particularly onerous but if the step is missed out then the payment could be wrong.  If it’s wrong once, it could by practice or habit be wrong again further compounding the problem for both the employee and the employer.  One reason why so much money has been paid out in arrears by employers to correct underpayments is that wages claims, including holiday pays have a shelf life of 6 years.

The illustration above pertains to annual leave only.  There is another method for calculating sick and bereavement leave and public holidays which utilises either Relevant Daily Pay or Average Daily Pay.  Again, where there is any question as to what method should be applied both calculations should be made and the greater of the two amounts paid.

Monday-isation of a Public Holiday and the Easter Holidays

There is of course much more to the Holidays Act than the method of calculation described.  One of the more practical issues we receive calls on this time of the year relates to Monday-isation of a public holiday.  It may be useful to briefly review the effect of that on the upcoming ANZAC public holiday.

The first step is to ask is Saturday, 25 April 2020 “otherwise a working day” for the particular employee.  If it is, then Saturday is their ANZAC Day.  If that Saturday is not a working day, then ANZAC Day is observed on Monday, 27 April 2020.

The Holidays Act says that if the public holiday falls on a Saturday and Saturday is “otherwise a working day” then the day is observed on the Saturday.  The greater of either their Relevant Daily Pay or Average Daily Pay is paid, or time and one half is paid plus an alternative day, depending on whether the day is taken or worked.

If the pattern of work suggests Saturday is not “otherwise a working day” then it is observed on Monday and the greater of either the Relevant Daily Pay or Average Daily Pay is paid or time and one half plus an alternative day, again this depends on whether the day is taken or worked.

The situation may be different for each employee and keep in mind an employee only gets one day of observance, not two.

Another question employers may have this time of the year relates to the Easter Holidays.  This year Good Friday falls on 10 April 2020 and Easter Monday takes place on 13 April 2020.  While both of these dates are a public holiday, owing to the secular nature of New Zealand society Easter Sunday is not a public holiday.  Shops without an exemption are to be closed on Easter Sunday.  Shops with an exemption under law which may open on Easter include garden centres, petrol statiosn and souvenir shops.  As long as certain conditions are met, local bylaws in accordance with the Shop Trading Act 1990, permits other businesses to open on Easter Sunday.

This is the case in Central Otago, the Clutha and Southland Districts.  While Dunedin trialed a policy a few years ago, it no longer supports the practice.  Employers who require staff to work on Easter Sunday must give four weeks written notice.  The employee can decline the work in writing and does not have to provide an explanation for the refusal.

It is important to keep in mind that employees may now raise a personal grievance if the employer fails to follow the required process or treats the employee adversely for not working Easter Sunday.

If you have any questions on Easter 2020 and public holidays around including trading restrictions, please talk to our legal team.


David Browne | Senior Solicitor/Legal Team Manager


Legal Team


David Browne | Senior Solicitor/Legal Team Manager | 03 456 1812 | 021 225 6938 |

Adam Siwerski | Solicitor | 03 456 1809 | 021 756 809 |

Stu Adamson | Solicitor | 021 197 4603 | 

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