Recommended Leave Rate Options

Std Hrs/Last 4 Weeks

This is set at country scope and is an option for employees that predominantly work a standard number of days and hours each week with minor variations. This option uses the alternative Ordinary Weekly Pay (OWP) calculation as defined in the Holidays Act based on the employee’s previous 4 weeks of earnings and is needed where an employee regularly receives additional but variable payments such as variable overtime, allowances, commission or incentive payments.   Whilst a set and forget policy to Holidays Act compliance is strongly discouraged, the inclusion of the 4 week calculation can offer some protection for employees whom unscheduled overtime starts to become a “regular” occurrence in their pay.

Using this leave rate option means the historic leave earnings do not need to be manually updated when an employee changes their standard hours. 
Annual leave is paid at the higher of:

• average rate (the last 52 weeks Holiday Earnings / current standard hours);
• the last 4 weeks Ordinary Weekly Pay Earnings divided by 4 divided by the current standard hours;
• basic hourly rate;
• special leave rate (if this has been defined)

Standard Hours

This should be used for employees that work standard hours and standard days each week with minor variation.  A typical salaried employee would be a good example of this type of employee.  This option uses the employee’s current standard hours to determine an average hourly rate based on Average Weekly Earnings.  The Last 4 weeks calculation for Ordinary Weekly Pay is not performed because an ordinary week is well defined for these types of employees and worked out using the employees normal work pattern.  Similar to the Std Hrs/last 4 weeks option above, historic leave earnings do not need to be manually changed when the employee changes weekly hours.  

Annual leave is paid at the higher of:

• average rate (the last 52 weeks Holiday Earnings / current standard hours);
• OWP (ordinary) rate;
• basic hourly rate;
• special leave rate (if this has been defined)

Non – Standard Hours 

This option is for employees with no standard hours or days of work.  These employees work highly variable and/or genuinely unpredictable hours and days each week (though not so irregular or intermittent as to be captured under s28 of the Holidays Act which permits payment of holiday pay at 8% of gross earnings).  Note that this approach should be used with caution as MBIE have been critical of employers adopting this option where a pattern of work can reasonably be established for the employee and one of the above methods can be used.

Annual Leave is paid at the higher of:

• 52 weeks average rate (Holiday Earnings  / actual hours worked);
• 4 weeks OWP rate (Ordinary Weekly Pay Earnings / last 4 weeks Actual Ordinary Hours);
• basic hourly rate;
• special leave rate (if this has been defined)

Other Leave Rate Options

Care should be taken if any of the following options are being used to ensure that they are apply to the employees that they are assigned to and that the necessary processes are being followed when an employee’s pattern of work changes.

Std Hrs - Manual Change

This option is used for employees with standard hours and days of work and where it is considered that we know what constitutes an Ordinary Working Week. This option does not do the Last 4 weeks calculation as the OWP rate is worked out using the work pattern. The hours in the historic leave earnings need to be manually changed when the employee changes their standard hours and for this reason we recommend the Standard Hours leave option above in its place.
Annual leave is paid at the higher of:

• 52 weeks Holiday Earnings divided by the last 52 weeks Qualifying Hours;
• OWP rate;
• basic hourly rate;
• special leave rate

Basic Hourly Rate

• leave is always paid at the employee hourly rate
• This option is NOT recommended

Last 4 Weeks

This is used for employees who have no standard hours or days and where we do not know what constitutes a normal working week.
Annual leave is paid at the higher of:

• the last 4 weeks Ordinary Weekly Pay Earnings by the last 4 weeks Qualifying Hours;
• the last 52 weeks Holiday Earnings divided by the last 52 weeks Qualifying Hours;
• basic hourly rate;
• special leave rate

Holidays Act Actual Hours

This option is as per Std Hrs – Manual Change option but uses actual hours. This is commonly used for employees on proportional accrual with standard hours.
It is used for employees who have standard hours but uses actual hours as the divisor as the employees can work varying hours. This option does not do the Last 4 weeks calculation as the OWP rate is worked out using the work pattern (standard hours). The historic leave earnings do not need to be manually changed when the employee changes weekly hours as the actual hours are used as the divisor.
Annual leave is paid at the higher of:

• the last 52 weeks Holiday Earnings divided by the last 52 weeks actual hours;
• OWP rate;
• basic hourly rate;
• special leave rate

Pay In Days (Holidays Act)

This option is used for employees who are paid their annual leave in days. They have standard hours and standard days and it is considered that we know what constitutes a normal working week. This option does not do the Last 4 weeks calculation as the OWP rate is worked out using the work pattern. The days in the historic leave earnings need to be manually changed when the employee changes their standard days.
 Annual leave is paid using the higher of:

• the last 52 weeks Holiday Earnings divided by the last 52 weeks Qualifying Days;
• the OWP rate;
• basic daily rate;
• special leave rate

Pay In Days (Last 4 weeks) 

This option used is used for employees who are paid their annual leave in days. They have no standard hours and we do not know what constitutes a normal working week.
Annual leave is paid using the higher of:

• the last 4 weeks Ordinary Weekly Pay Earnings by the last 4 weeks Qualifying Days;
• the last 52 weeks Holiday Earnings divided by the last 52 weeks Qualifying Days;
• basic daily rate;
• special leave rate

Notes

• If a calculation involves standard hours, the standard hours in the calculation will be reduced by any unpaid absent weeks.