Planning for public holidays
Each year New Zealand employees can get 11 public holidays. Depending on our normal days of work, we could be entitled to be paid for this. I can say that 11 times a year we receive calls from employers trying to work their way through calculating how they pay their employees correctly for these days.
It’s an easy formula when employees are employed full time, five days a week, Monday to Friday, no overtime or additional payments. In this example they would most likely be paid their relevant daily pay for the public holiday (ie what they would normally have been paid).
Do I pay them for the public holiday?
Ask yourself, would they have worked if not for the public holiday? Yes, they would have because they work each day Monday to Friday. Then determine relevant (or average) daily pay.
Horticulture and hospitality industries in Tairawhiti employ many people, adding complexity due to days and hours worked being variable within a pay period. In such cases it would be more likely that average daily pay would be used. However, whatever payment is made, it needs to be the greater of relevant daily pay or average daily pay.
The Holidays Act covers this in general terms but it’s not until an actual calculation is done that it becomes clear as to which type of daily pay is appropriate.
In hospitality, employees can work to a roster. This can make it easier because the roster sets out whether they would have or did work on that day.
Do I pay them for the public holiday? Ask yourself this question: Would they have worked if not for the public holiday? What does the roster say? If they work, they get paid; if they don’t work, they don’t get paid.
To determine how to work out public holiday payments for those with varying working hours, a good place to go is here: www.employment.govt.nz/leave-and-holidays/calculating-payments-for-leave-and-holidays/relevant-and-average-daily-pay/ and scroll down to the pay calculator.
Being prepared in advance of a public holiday, setting up a system to easily calculate days and hours worked, and putting in some planning to avoid a nightmare when a pay day is looming, is the advisable approach. Remember that each public holiday will require a separate calculation for each employee whose pay period has seen variables within it, including hours and days.
It’s in the news that hospitality is a focus area for the Ministry of Business, Innovation and Employment (MBIE), so doing the best to get employee calculations correct is crucial. We also want to ensure that the correct remuneration is being paid, whether work on a public holiday has been completed or not.
The following example helps illustrate the formula:
When working out average daily pay, calculate the employee’s gross earnings for the 52-week period before the public holiday — regardless of how long they have worked, because that is the period that legislation requires us to do.
An employee has worked for two months, their gross earnings for this period were $2880, they worked variable days and a variable number of hours each day. Labour Day fell during the last pay period.
Calculate average daily pay:
The employee’s hourly rate is $20; total full or part days worked over the previous 52 weeks were 32 days; gross earnings over that time were $2880 ($20 per hour x 144 hrs worked), divide by 32 days = $90. This is the average daily pay to be paid for Labour Day only. All future public holidays would have the same formula applied at the time of the public holiday falling, but based on a different number of actual hours and gross earnings.
Calculate relevant daily pay:
In the example above, relevant daily pay wouldn’t be used because days and weeks are variable.
Permanent employees would be paid time and a half for any hours worked on a public holiday that is a normal working day for them and an alternative holiday; casual employees would usually be paid time and a half for any hours worked on a public holiday and no alternative holiday.
Linda Paulson is an HR consultant with the BDO Gisborne team. She is motivated by getting to know employers and their business; to understand issues and help them achieve best outcomes in the employment space.