Calculating pay for annual leave

Pay rates for annual leave

Ace Payroll automatically calculates pay rates for annual leave - all you need to do is confirm them.  
 

Calculation and legislation

Annual leave pay rates are defined by section 21 (Calculation of ordinary holiday pay) of the Holidays Act 2003.

You are required to pay the greater of:

• the employee’s ordinary weekly pay as at the beginning of the annual holiday, or

• the employee’s average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holiday.  
  
  

Ordinary weekly pay is a term defined by section 8 (Meaning of ordinary weekly pay), and means the greater of:

• An employee's usual pay at the time of taking the holiday, or

• The employee's average earnings over the previous four weeks.
  
  

If you do not have 12 months worth of pay history for an employee, use the ordinary weekly pay method.

Daily pay for annual leave is calculated either from the employee’s ordinary weekly pay or from their average weekly earnings, divided by the days per week that they work.

All of these rates are calculated automatically.

Calculation of pay rates in Ace Payroll

When you pay holiday pay to an employee Ace Payroll shows the following screen. It provides a list of the three pay rate calculations required by section 21.

Pressing the report icon next to any of the pay rates produces a detailed report of the calculation.

To open this window from the front screen, click Calculate Pays > Leave > Holiday Pay > Next

Annual Average

This the is the employee's average weekly earnings for the 12 months up to the end of the last pay period before the annual holiday.

Four Week Average

This is the employee's average earnings over the last four weeks.

Current Usual

If you have entered a standard pay for the employee, then it is shown here.

 

Daily rate

Ace Payroll automatically calculates daily payment rates for leave.  All you need to do is confirm the rate.

After you have entered the days your employee has taken or will be taking as annual leave, click the Confirm Daily Rate button to open the following window.

Click GO to accept the suggested daily rate, or enter a different value manually.    

  FAQs