Paying employees for closedown periods

ANSWER ID:4410

The method for paying employees annual holidays during a closedown period varies depending on whether an employee is entitled to annual holidays or not. Employees are entitled to annual holidays after 12 months of continuous employment.

For more information, see Employment New Zealand – Annual Closedowns.

Employees entitled to annual holidays

Employees should be paid annual leave, in other words use the Annual Holidays (ANHL) paycode. If employees do not have enough annual leave to cover the closedown period the employer and employee may agree to pay annual leave in advance.

Employees not entitled to Annual Holidays

For employees who aren't entitled to annual holidays (those who have been with you for less than a year), you have two options.

Agree to pay the period as annual holidays in advance using the ANHL paycode (as with other annual leave).
Pay the employee their accumulated holiday pay and update their leave anniversary to one year from the company's closedown date.

The employee's holiday pay is 8% of their gross earnings since the start of their employment, minus the value of any annual leave they have already taken in advance.

1. Pay out the holiday pay

This can be done as part of a normal pay run.

Go to Enter Pays screen, and double-click the employee.
Add all the normal pay details (wages, etc).

The holiday pay rate changes as you add gross earnings to the pay run. This is normal – gross earnings from the current pay count towards the holiday pay amount.
Enter 1.00 into the Quantity column of the HP Holiday Pay pay code. This adds the entire balance of holiday pay (the Rate column) into the active pay.
Click through the warning message.
Continue the pay run, and finalise it as normal.

Once the employee has been paid their holiday pay, go ahead and update their leave anniversary.

2. Update the leave anniversary

Go to Maintenance > Maintain Employees and select the employee.
Open the Leave Details tab.
Update the Next Holiday Anniversary Date field to the closedown date.
Change the Gross Earning since... field to zero.
Click Close.

The employee has now been paid for the annual closedown and their anniversary has been updated.

What is a Common Anniversary Date?

If Payroll has been set to use a common anniversary date (go to the Tools menu and choose Options then click the Leave tab) then the above methods apply except that the anniversary date for an individual cannot be changed. So an employee who is not yet entitled to Annual holidays it is best to either pay out all Holiday Pay (HP) accrued up to the Common anniversary date or convert holiday pay to annual leave (go to the Tools menu and choose Options then click the Leave tab).

see Common anniversary date for more information.