The Holidays Act 2003 states that an annual leave rate should be calculated at the start of the employee’s leave and be used for the entire duration instead of being updated each pay period.  This includes leave across pay periods, as long as the leave taken is continuous.

This process is now automated in DataPay, with the functionality enabled for all companies in New Zealand environments by default.

Refer to section 21 of the Holidays Act for more information about the legislation: https://www.legislation.govt.nz/act/public/2003/0129/latest/DLM236884.html

How does DataPay identify continuous annual leave?

The new functionality will identify annual leave taken that immediately follows another annual leave taken, including leave separated by another leave type (e.g. a public holiday) or spanning multiple pay periods.

For this functionality to work, the leave dates must be supplied, and the leave needs to be added to the correct pay period. Continuity can be detected within a pay packet, pay period and between pay periods.  If the annual leave is identified as being continuous, then the rate for the subsequent leave will match that of the first leave request. 

Annual Leave is considered Continuous in two cases:

·         Scenario 1 - Annual Leave Taken directly before the start date of the annual leave.

In the screenshot below of two leave requests, there was Annual Leave Taken on March 24th, so the Annual Leave Taken on March 25th is identified as Continuous.  If annual leave is taken around rostered days off (like a weekend), those dates must be included in the leave request. If there is a gap with no leave, the annual leave will not be identified as continuous.

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·         Scenario 2 - Annual Leave with other leave taken. Where Annual Leave Taken is separated by other leave taken components (paid or unpaid).

In the screenshot below, the dates of the annual leave are 24th March and 26th March. Annual Leave on the 26th March is Continuous because there is a public holiday on the 25th March.

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In which instances will DataPay not detect continuous annual leave?

If the Public Holiday Taken for 25^th March is removed from the example above, the second annual leave on the 26th would no longer be Continuous.

When Annual Leave Taken is not identified as being continuous with a previous Annual Leave Taken, it will be marked as Start Continuous.

If Annual Leave Taken component dates are not within the leave requested for dates (this can happen if Use Leave Dates is not ticked when applying leave requests), continuity detection will not apply. When this occurs the Continuous Leave Calculator will mark the leave as Not Continuous and there will be a pay packet warning, which will also appear in the standard Errors and Warnings report.

If there are multiple pay packets for an employee in a period, it is strongly advised that all leave requests are applied to the Main pay packet. Failing to do so may prevent continuity from being detected and all leave requests could be marked as Start Continuous.

Payment for continuous annual leave

The output of the Continuous Leave Calculator flows into the Annual Leave Payment - Parental Rate component.

When annual leave has been identified as Continuous, the output rates : ‘Leave Taken Rate - Parental Rate’, and ‘Leave Taken Rate’ will be the values that were on the most recent Leave Taken that was Start Continuous.  The rates for the current period will still be calculated and shown but not used.

In the above example, the left pay packet includes Annual Leave Taken on April 30th, which was paid at the ordinary rate of $40.86617. In the following pay packet to the right, the Annual Leave Taken on May 1st is continuous with Annual Leave Taken on April 30th, so it is paid at the same rate despite the ordinary rate being higher in that period ($42)

Annual Leave Paid at Parental Rate

This works the same as paying at the non-parental rate. If the employee uses up all of their parental leave, the non-parental rate as at Start Continuous will be used.

If an employee uses up all of their remaining parental rate leave and continues to take annual leave in a continuous period, the non-parental leave will be paid at the rate of the parental leave calculated in the first leave request.

What if I want to pay more?

New setting “When Leave Rate Has Increased”

You may prefer to go over and above the Holidays Act 2003 and pay an employee at the higher rate for any subsequent annual leave taken if the employees leave taken rate has increased. An employee’s current rate could be higher if their salary increased while they are on leave, or if their average rate has increased from the previous period.

As such, a new field is being added to the Annual Leave Taken component called “When Leave Rate Has Increased” with two options to choose from:

·         Use Rate at Start of Leave (Default, Holidays Act 2003 minimum requirement)

·         Use Current Rate if Higher

If the option is changed to ‘Use Current Rate if Higher’, the system will consider how the leave would be paid if it started on the current date, and compare this to the rate from the start of the leave. If the current rate is higher, it will be used to pay the leave. The employee may benefit from this but they cannot be disadvantaged.

Manual Pay Amount

As always, there is also the option to enter a Manual Pay Amount. This will be used instead of the calculated rates. However, be vigilant when setting a manual payment on a ‘Start Continuous’ leave taken as this may not flow through as expected. 

Other Considerations

Annual Leave Termination and Annual Leave Cash Up

The above components are not affected by continuity and do not affect the continuity of other leave taken.

Back Pay

If an employee’s pay rate increase is back dated to the middle of a period of annual leave, and you try to back pay this, the annual leave rate will not increase unless ‘Use Current Rate if Higher’ is used.   

Reversals and Adjustments

Making changes to leave in adjustment pay packets can influence whether existing leave is considered continuous. However, you may need to reverse and adjust further periods to see the impact of this.