Dealing with holiday pay entitlements when an employee's work pattern changes (New Zealand)

The Holidays Act 2003 calls for all permanent employees to become entitled to 4 weeks of Annual Holidays after 12 months of continual service.

Exo Payroll can manage Holiday Pay in Days, Hours or in Weeks. Where an employee is setup in Day or Hours, the employees Annual entitlements are based on the employees work pattern, e.g. an employee works 5 days per week so has an entitlement of 4 weeks x 5 days = 20 days.

This article is in relation to Holiday Pay that is setup in Days/Hours only. For Holiday Pay that is setup in Weeks, refer to White Papers available here.

The information detailed below is based on what has been advised by MBIE and the full MBIE guidance documentation can be accessed here.

When a permanent change to an employee's work pattern occurs and leave is tracked in Days or Hours rather than Weeks, the Entitlement needs to be changed to reflect the new pattern. For example, employee changes from 3 days per week to 5 days per week then the Entitlement is changed from 12 days to 20 days. Any Outstanding or Advanced figures should also be changed as the Balance needs to reflect their new work pattern.

Employers need to be careful when decreasing entitlement as it could cause problems if they haven't been doing it before, haven't been doing this consistently and if they haven't communicated this to the employees.

If the employee has a change in their work pattern that does not affect the number of days that they are working each week, e.g. employee is working 5 x 8-hour days then changes to working 5 x 4-hour days, then the entitlement does not need to change if they are tracking their balances/entitlements in Days. 

The Days Paid figures for the last 12 months of pays should also be changed as the divisor should reflect their entitlement, e.g. work pattern changes from 3 days per week to 5 days per week so the Days Paid figure in each pay for the last 12 months should be changed from 3 to 5.

The Permanent Part-time/Pro-Rata Method should only be used if the employees work pattern is so variable that you cannot define a week. For more detailed information, refer to White Papers available here.

Each time an employee has a permanent change to their work pattern then a recalculation of the Entitlement, Outstanding/Advanced and Days Paid should be done, e.g. employee is working 5-day weeks then goes on Maternity Leave. When they return from Maternity they go to 3-day weeks so the recalculation should be done. After 6 months, if the employee changes their work pattern to 4-day weeks then another recalculation should be done.

For ease of use, it is recommended to switch employees to a Weeks setting for simpler management of work pattern changes.

MYOB advise contacting MBIE on 0800 20 90 20 for further clarification of what to do, relative to the situation being experienced.

For more detailed assistance of what to do in Exo Payroll, the MYOB Exo Professional Services Team can provide this assistance and can be contacted on 0800 949 703.

Need more help? You can open the online help by pressing F1 on your keyboard while in your software.

You can also find more help resources on the MYOB Exo Employer Services Education Centre for Australia or New Zealand.