Holiday season smarts — are you prepared?

Debra Leach 

Here is BDO’s annual reminder for employers around how, which and when to pay those problematic public holidays, plus a tip on how to pay employees’ final pay.

CLOSEDOWN PERIODS

If you are lucky enough to have a complete shutdown of your business over the December and January holiday period, you must

remember:

• You must have given your employees at least 14 days’ notice of the shutdown period

• If the public holiday days fall on a day that would otherwise be a work day, you must pay your employee for those days.

For example:

Your business is closed from December 22 to January 3, 2024

For the 2023-2024 holiday period the following would apply:

o Monday, December 25 – Public Holiday,

Christmas Day

o Tuesday, December 26 – Public Holiday,

Boxing Day

o Monday, January 1 – Public Holiday,

New Year’s Day

o Tuesday, January 2 – Public Holiday,

Day after New Year’s Day

All other working days would be annual leave.

CASUAL/ON CALL WORKERS

Casual/on-call workers are entitled to receive payment for a public holiday if it would otherwise have been a working day.

For example, if an employee can show a pattern of working on Mondays, they would more than likely be entitled to be paid for Boxing Day and the day after New Year’s Day.

If the public holiday falls on a day that an employee would normally work, but they cannot work due to weather conditions, the Holidays Act is silent on this scenario, but in our opinion, a fair and reasonable employer would pay the employee.

TRANSFERRING THE OBSERVANCE OF PUBLIC HOLIDAYS

Employers and employees can agree to transfer the observance of public holidays to another working day.

Any request must be considered in good faith and any agreement must meet minimum statutory requirements.

IF YOUR BUSINESS IS OPERATING ON A PUBLIC HOLIDAY

An employee can only be made to work on a public holiday if:

• it falls on a day that they would have otherwise worked on, and

• their employment agreement says they must work on the public holiday.

When a public holiday falls on a day your employee would usually work, they’re entitled to a paid day off, no matter how long they’ve been working for you. If they agree to work anyway, you must:

• pay them at least time-and-a-half

• give them another paid day off later (a day in lieu/alternate leave).

Each employee can get a maximum of 12 public holidays a year, for example:

• if a public holiday is Mondayised, they can’t claim two public holidays (ie, one for the actual date and one for the Mondayised date)

• an employee can’t be entitled to more than four public holidays over the Christmas and New Year period, regardless of their work pattern.

On-Call Employees

Employees need to have an “on-call’ clause in their individual employment agreement if they have a regular on-call pattern as part of their role.

HERE ARE A COUPLE OF PUBLIC HOLIDAY SCENARIOS:

SCENARIO 1:

Pete works on an ANZAC Day that falls on a Sunday (Sunday is a normal working day for Pete and his employment agreement requires him to work on public holidays). Pete normally earns $20 an hour and his employment agreement gives him double time for working on a Sunday.

Under his employment agreement Pete would get 2 x $20 = $40 an hour for the time he works on Anzac Day.

Under the Holidays Act 2003 the minimum Pete would get is $20 x 1.5 = $30 an hour for the time he works on Anzac Day.

Pete gets more under his employment agreement than the Holidays Act 2003 so he would be paid $40 an hour (he would also get an alternative holiday because Sunday is an otherwise working day for him).

SCENARIO 2:

Ella is a salaried employee who works the same hours each day and the same days each week. In her case her employer works out her daily rate by dividing her annual salary by 52, and then by the number of days worked each week.

Ella’s gross salary is $40,000 per year and

she works five 8-hour days per week:

• her weekly pay is $769.23 (40,000/52)

• her relevant daily pay is calculated at 153.85

(769.23/5)

• time and a half of the relevant daily pay is

$230.78 (153.85 x 1.5).

Ella is paid for the time she actually worked on the public holiday on the basis of $230.78 per day. For example, if she works only half a day, she gets paid $115.39 (half of $230.78).

Ella would also get a full 8-hour alternative holiday if she would have normally worked on the day, no matter how many hours she worked on the public holiday.

ANNUAL LEAVE CALCULATION FOR EMPLOYEES’ FINAL PAY

This can be a tricky one to explain to your exiting employees as the calculation is different for accrued and outstanding (owed) leave if the final pay falls before the employee’s anniversary start date.

This means if the employee started on March 1, 2020 the anniversary of the entitlement to annual leave would be March 1, 2021 and every year following. Between March 1, 2020 and March 1, 2021 they would be accruing annual leave at 1.66 days per month if they are on four weeks annual leave per year. They will receive their outstanding four weeks of leave for the previous 12 months on March 1 every year, providing they have not used any leave during the year (this would be using accrued leave).

Example:

If an employee started on January 1, 2023 and left on January 1, 2024 — and had four weeks’ leave owing, so didn’t take any leave at all — he would get 8 percent of his salary paid as annual leave in his final pay.

If he earned $100,000, he would be paid out $8000 in his final pay — which is four weeks’ leave.

But if the final pay is not a FULL 12 months’ worth of annual leave, then it is calculated differently.

Any outstanding leave to be paid to the exiting employee will be paid at either average or ordinary weekly pay. The accrued leave will be calculated at 8 percent of the gross earnings since the employee’s anniversary date and added to the outstanding leave payment to give them their final leave payment.

■  Should you require further information on the above, or any other human resources issue, please contact Debra Leach at the following:

debra.leach@bdo.co.nz     021 567 918

Enjoy your Christmas and New Year celebrations!