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Relevant daily pay and average daily pay

Public holiday, bereavement and sick leave and alternative holiday payments are calculated using relevant daily pay or average daily pay (if applicable). Annual holidays are calculated differently.

Relevant daily pay

Relevant daily pay (‘RDP’) means paying an employee what they would have earned if they were at work on the day.

Relevant daily pay includes:

  • payments such as regular (taxable) allowances, commission and bonuses if the employee would have received them on the relevant day
  • overtime payments, if the employee would have received them on the relevant day
  • the cash value of board or lodgings if this has been provided by the employer.

Relevant daily pay does not include:

Employment agreements can have a special rate of RDP for calculating payment for (any or all of) public holidays, alternative holidays, sick leave or bereavement leave, but only if the rate is at least the same as RDP.

 

Image of the flowchart: What is Relevant daily pay? [PDF 241KB]

What is Relevant daily pay?

 

Average daily pay

Average daily pay (‘ADP’) may only be used if:

  • it’s not possible or practicable to work out relevant daily pay, or
  • an employee's daily pay varies in the pay period in question.

Average daily pay is a daily average of the employee’s gross earnings over the past 52 weeks. This is worked out by:

  • adding up the employee’s gross earnings for the period, and
  • dividing this by the number of whole or part days the employee either worked or was on paid leave or holidays during that period.

Gross earnings has more information.

Karim works four days per week and his hours vary between six and nine per day. He is off sick for a day (that he would usually work) and is entitled to sick leave. Karim’s varying work pattern means that his employer cannot work out his relevant daily pay. Therefore, average daily pay should be used (for his public holidays, sick and bereavement leave and alternative holidays entitlements).

The formula to calculate Karim’s average daily pay is:

  • total gross earnings for 52 weeks = $34,320
  • whole or part days worked (includes paid holidays or leave) = 208 days
  • average daily pay = $34,320 divided by 208 days = $165.

When there is a choice to use RDP or ADP

There are some situations when employers may use either relevant daily pay or average daily pay. For example, where an employee’s daily pay varies in the pay period but the variation is so regular and predictable that it is straightforward to determine what the employee would have earnt on the day if they had worked. In these situations, it is recommended that employers use RDP because:

  • employees generally expect to be paid the amount they would have received if they had worked on the day
  • using RDP (where this can be calculated) will always comply with the Holidays Act 2003.

If an employer and employee can’t agree on the amount of the employee’s RDP or ADP, contact us for help.

For help in calculating ADP, you can use the pay calculator (external link) (external link) . It will take about 5 minutes to work through.

Image of pdf: Relevant daily pay vs Average daily pay [PDF 243KB]

Relevant daily pay versus Average daily pay

 

 

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