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Paying via payroll system

How employers and payroll teams can check that their payroll system complies with minimum leave entitlements and payments in the Holidays Act 2003.

The Holidays Act 2003 provides specific minimum holidays and leave entitlements and payments that must be met by New Zealand employers. This includes making appropriate calculations every time leave or holidays are taken.

To support compliance, payroll systems need to make all the calculations in the Holidays Act 2003.

As well as specific calculations, payroll systems need to:

  • be able to be updated to reflect business operations (e.g. changing employee work patterns, rosters etc.)
  • record all relevant time worked and pay paid
  • have accurate and up to date information.

If there is complexity or any change in employee work patterns, it needs to be reflected in the system. In many cases, an employee’s working patterns and therefore pay for leave and holidays are unique to them.

Calculating annual holiday payments has examples on how to calculate leave and holiday payments.

To check that you are in line with legislation and providing employees with at least the minimum leave and holidays pay and entitlements use our Assessing your payroll system checklist for paying employees for holidays and leave [PDF 482KB].

The Labour Inspectorate uses the following questions as a starting point for employer audits, that are checking for Holidays Act compliance.

General

  1. Were accurate and complete wages and time, and holiday and leave, records kept and used in calculations?
  2. Was the correct Gross Earnings figure used?

Annual Holidays

  1. Did employees receive what appropriately constituted 4 weeks holiday entitlement for each year of work?
  2. Was the deduction of time from the entitlement for the holiday taken appropriately calculated based on the time taken and what appropriately constitutes a week for the employee?
  3. Was Average Weekly Earnings (AWE) vs Ordinary Weekly Pay (OWP) used for the holiday pay calculation? Was the calculation correct? Was the greater rate applied?
  4. Was Pay As You Go – PAYG (8%) used? Was the calculation correct?
  5. Were national public holidays accounted for on termination?
  6. Was the 8% accounted for on termination?

Bereavement leave, alternative holidays, public holidays and sick leave (BAPS)

  1. Was Relevant Daily Pay (RDP) paid if appropriate?
  2. Was Relevant Daily Pay/Average Daily Pay (ADP) used for unworked Public Holidays, Sick Leave, Bereavement Leave and Alternate Holidays? Was the calculation correct?

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