Navigating annual holidays and close-down periods

This blog digs into:

• Annual leave entitlements ✔️
• Navigating close-down periods ✔️
• What to do if your business is working through ✔️
• How to work through entitlements for employees who work on roster systems ✔️
• Public holidays ✔️
  
  

What is Annual Holiday Pay?

Annual Holiday Pay is sometimes known as holiday pay and annual leave. However as the Holidays Act 2003 only refers to Annual Holiday Pay, we are going to stick with that terminology in this blog.

• Annual Holiday Pay is a value calculated at 8% of gross earnings accrued in every 12-month period.
• Annual Holiday pay is defined as an ‘entitlement’ AFTER 12 months continued employment.
• Annual Holiday Pay in advance refers to the provision in the Act for an employee and employer to agree to pay a value of Annual Holiday Pay prior to the completion of any 12-month period.
• Every employee who has worked for more than a 12-month period, therefore has their current entitlements (earned from the previous 12 months) and their accruing leave value being earned in the current 12-month period.
  
  

Negotiating Close-Down Periods

If a business has a regular close-down period, generally this should be written into the employment agreement prior to the employee starting work.

If your business doesn’t usually have an annual close-down period, but you are thinking about implementing it this holiday season, there are a number of things you need to consider.

First, check your individual employment agreements (IEAs) to see what is stated.

• Do they allow for an annual close-down?
• If so, do they have a provision allowing the employer to be able to pay annual leave in advance for employees who haven’t yet completed 12 months of continued service?

If you have clauses in your IEA that gives guidance on close-down procedures, ensure you follow those guidelines.

If you don’t have these clauses, you must:

1. Give your employees as much notice as possible that you are thinking about a close-down period and advise them of potential dates.
2. Once you have decided to implement a close-down period, you must confirm this in writing to your employees not less than 14 days prior to the close-down commencement date.

Please note that a business may only invoke one close-down period in any 12-month timeframe.

For more information please visit, Close-downs (employment.govt.nz)

Close-downs for employees who have completed less than 12 months of service

So, what do you do if you have chosen to implement a close-down period and you have employees working for you who are in their first 12 months of employment with the company?

In this instance employees who have not completed their 12 months continued service must be paid 8% of their gross earnings since the commencement of their employment (defined as Annual Holiday Pay in advance).

If the employee has not earnt enough leave to cover the period required, you can choose to either:

1. Let the employee take their leave in advance – therefore allowing the employee to go into negative leave owing.
2. Let the employee take the additional leave as unpaid.

If considering option 1) be sure that this option is sustainable for your business and only applies to a minimum number of employees, otherwise, if they choose to leave soon after the close-down period, they may end their employment owing you money.

Close-downs for employees who have used up all the entitled leave

What happens if my employee has completed their 12 months continued service but has all used all their current entitlements (from the previous 12-month period)?

In this instance, you may

1. Agree to pay some of their accruing leave value from the current 12-month period in advance, (also Annual Holiday Pay in advance).
2. Let the employee take the additional leave as unpaid.

This decision is at your discretion 👍

Navigating public holidays

Employees on roster and variable hours: Determining what would be an otherwise working day.

When employees work variable hours and days, it can sometimes be tricky to work out who is entitled to Public Holiday payments.

When working out if an employee has an entitlement, you need to consider the following:

1. What is stated in the IEA?
2. The employee’s work patterns.
3. Other relevant factors including:
   a) If the employee works only when work is available.
   b) your rostering system.
   c) ‘reasonable’ expectations from both parties that the employee would usually work that day.

The most practical way to do this is to work out a percentage value by reviewing the past 13 weeks to see if the employee worked on that day. If for seven of the 13 weeks (53%), the employee did work that day, then they are entitled to the payment. If the reverse is true and they only worked that day six times in the past 13 weeks (46%), then they are not entitled to the payment.

If your business is highly seasonal or for some reason 13 weeks doesn’t accurately reflect the ‘usual’ pattern of work for the employee, then review all 52 weeks to assist in providing a clear answer.

Continuing Business Over the Holiday Season

If your business will continue to operate during the Christmas period, you need to be prepared with sufficient notice to employees as to which Public Holiday dates they may be required to work (if any).

Paying staff over the 2022/2023 Christmas break

Outsourcing payroll

If you outsource payroll to RightWay or any other service provider, be aware that Monday 26 and Tuesday 27 December 2022 and Monday 2 and Tues 3 January 2023 are Public Holidays, so you will need to get wage and time records to your payroll specialist by 9 am Friday 23 and Friday 30 December 2022 respectively, as we are on a close-down ourselves.

In-house payroll

Budgeting for changed payroll processing days is essential in planning for your Christmas cash flow requirements. With this in mind please be aware that if you manage payroll in-house and pay your staff weekly, there are two wage payments that will need to be processed in the week before Christmas 2022, as banks do not process payments on public holidays or weekends.

For example, if you normally pay wages on a Tuesday, you will need to process a payment on Tuesday 20 December for the week previous (12 Dec- 18 Dec), then again on Friday 23 Dec for that week (19 Dec - 25 Dec). The week following Christmas would also be a Friday payday, on 30 December for the week (26 Dec- 1 Jan), then the next payday will be back to normal- as in the Tuesday following a full previous week’s work, which will be 10 Jan 2023.

It’s a great move to give your employees the heads up about this sooner rather than later so they can budget for it.

For further information regarding employees’ public holiday entitlements please visit:

• Public holidays » Employment New Zealand
• Public holidays falling on a weekend » Employment New Zealand

Additionally, if you are intending on providing a staff bonus, please be aware that it is subject to PAYE.

If you would like further assistance with your HR or bookkeeping needs, please get in touch