Everyone
Public holiday pay
Employees must be paid for public holidays if the public holiday is a normal working day for them. If they work on a public holiday, they must be paid at least time and a half; and this provision must be included in employment agreements.
What an employer must do
For public holiday rights, there are a number of things to work out:
- on which day the public holiday will be observed for each employee if it’s a public holiday that might be Mondayised (or Tuesdayised)
- whether or not the day is an otherwise working day for the employee
- whether or not the employee will be working on the day
- how much the employee will be paid for the day
- whether the employee is entitled to an alternative holiday.
Gross earnings (gross pay)
Gross earnings is used in a number of different situations to calculate payment for holidays and leave.
What gross earning means
For the purposes of calculating payments for holidays and leave, gross earnings means all payments that the employer is required to pay to the employee under the employee’s employment agreement for the period during which the earnings are being assessed. If all the components of gross earnings are not included in the relevant calculations for holidays and leave, the employee will likely be underpaid, and the employer will not comply with the Holidays Act 2003.
When to use gross pay in calculations
Gross pay is used to calculate:
- Ordinary Weekly Pay for determining payment for annual holidays (when the ordinary weekly pay formula is used).
- Average Weekly Earnings for determining payment for annual holidays.
- Average daily pay (when this can be used instead of relevant daily pay) for calculating payment for public holidays, sick, bereavement and family violence leave and alternative holidays.
- Payment for annual holidays if the employee meets the criteria for being paid on an 8% pay-as-you-go.
- The 8% of gross earnings component in an employee’s final pay.
Gross pay includes (but is not limited to):
- salary and wages
- allowances (but not reimbursing allowances)
- all overtime
Working overtime and extra shifts(external link)
- piece rates
- productivity or performance payments, for example, most commissions, bonuses and incentives
- payment for annual holidays and public holidays
Annual holiday pay(external link)
Public holiday pay(external link)
- payment for sick, and bereavement and family violence leave
Pay for sick, bereavement and family violence leave
- the cash value of board and lodgings supplied
- the first week of compensation payable by the employer under Section 98 of the Accident Compensation Act 2001 - New Zealand Legislation(external link)
- any other payments that are required to be made under the terms of the employment agreement.
- reimbursements
- any weekly compensation payable under the Accident Compensation Act 2001 that the employer does not have to make
- payment for leave from work when an employee is on volunteer leave for military service
- payment for annual holidays that have been paid out instead of taken (that is up to one week per entitlement year)
- any payments that the employer is not bound, by the terms of the employee’s employment agreement to pay the employee. These payments will be truly discretionary and will be relatively rare.
- redundancy payments
Discretionary payments
‘Discretionary payments’ have a special meaning in relation to the Holidays Act 2003. If an employer must make a payment to the employee, under their employment agreement, commission scheme, bonus scheme rules etc, then it is not a discretionary payment and it must be included. This is the case even if the payment amount is discretionary and could even be $0. It is rare for payments to be excluded. So, if an employer is unsure, they should seek advice or err on the side of caution and include the payment.
If an employer is bound under the employment agreement to make a payment, then it is not a discretionary payment. Discretionary payments are ex-gratia payments that an employer does not have to pay the employee under the employment agreement.
- ‘Employment agreement’ should be considered widely to include variations of employment agreements, letters of offer, rules of commission schemes, bonus scheme rules, policies etc.
- If the terms of a payment scheme are intended to be binding on the employer and employees, it is unlikely to be a discretionary payment.
- If an employment agreement states that a payment is a discretionary payment for the purposes of the Holidays Act 2003, this in itself does not make it a discretionary payment.
- Whether the employer is bound under the employment agreement to make the payment is what determines whether or not it is discretionary.
- If an employer is bound by the employment agreement to make a payment to the employee even if the amount is discretionary (and could be zero), it is not a discretionary payment.
- If the payment is dependent on the employee and/or the organisation meeting, for example, any type of targets, quotas, performance criteria or indicators this does not make it a discretionary payment.
- If payments are made on a regular and consistent basis, for example annually if some criteria are met, it is unlikely to be a discretionary payment.
- If employees have a reasonable expectation of payment based on past practice, to the extent that the payment forms part of the employment agreement, it is unlikely to be a discretionary payment.
As it is rare for payments to be excluded, it is recommended that employers seek advice before determining that a payment is discretionary, or else err on the side of caution and include the payment. Examples of payments that are unlikely to be discretionary payments for the purposes of the Holidays Act 2003.
- An employee’s remuneration statement includes a bonus amount at 100%. The bonus is covered by bonus rules that state that payment of and amount of the bonus is dependent on company and employee performance.
- An employee’s employment agreement has an amount for on target earnings for commission. The actual amount of commission earned by the employee will depend on how many sales they make.
- Each year the company decides who will be participating in the bonus scheme. Letters are sent out to employees who will be participating telling them that they are eligible to participate this year. The letters state that the amount they receive depends on their performance and could be zero.
- A company gives all employees a Christmas bonus each year. This helps them recruit and keep good staff and employees are told about it by their employer when they start work with the company.
Examples of payments that are likely to be discretionary payments for the purposes of the Holidays Act 2003
- A business has had a good year, and the owner decides to give everyone a one-off bonus to reward their hard work. They do not do this regularly.
- A company gives all employees a Christmas bonus from time to time.
- A company decides that one employee has had an outstanding year and will be given an ex-gratia lump sum payment of 10% of their wages for the last 12 months.
Relevant daily pay
Relevant daily pay is paying an employee what they would have earned if they were at work on the day. This means, someone would get their usual pay and any of the following that are relevant:
- payments such as regular (taxable) allowances, commission and bonuses if the employee would have received them on the relevant day
- overtime payments if the employee would have received them on the relevant day
- the cash value of board or lodgings if the employer has provided this.
Relevant daily pay does not include:
- employer contribution payments into an employment superannuation fund
- reimbursements payable to the employee for the day.
Employment agreements can specify a special rate of relevant daily pay for calculating payment for public holidays, alternative holidays, sick, bereavement and family violence leave, but only if the rate is at least the relevant daily pay amount.
Average daily pay
Average daily pay is the daily average of the employee’s total earnings over the past 52 weeks. This is worked out by:
- adding up the employee’s total earnings for the period, and
- dividing this by the number of whole or part days the employee either worked or was on paid leave or holidays during that period.
Average daily pay can only be used if:
- it’s not possible or practicable to work out relevant daily pay, or
- an employee's daily pay varies in the pay period in question.
The choice between using Relevant and Average Daily Pay
There are some situations when employers may use either Relevant Daily Pay (RDP) or Average Daily Pay (ADP). For example, where an employee’s daily pay varies in the pay period, but the variation is so regular and predictable that it is straightforward to determine what the employee would have earned on the day if they had worked. In these situations, it is recommended that employers use RDP because:
- employees generally expect to be paid the amount they would have received if they had worked on the day
- using RDP (where this can be calculated) will always comply with the Holidays Act 2003.
If an employer and employee cannot agree on the amount of the employee’s RDP or ADP, contact us for help.
Relevant daily pay (RDP) vs average daily pay (ADP) [PDF, 416 KB]
Payment for working on a public holiday
For working on a public holiday (regardless of whether it’s an otherwise working day for the employee), all employees must be paid (at least) the greater of:
- the employee’s relevant daily pay or average daily pay (if applicable) for the time actually worked on the day (not including any penal rates in the employment agreement that relate to that day) plus half that amount again (time and a half), or
- the employee’s relevant daily pay (or average daily pay) that relates to the time actually worked on the day (including any penal rates in the employment agreement); the employee is not entitled to time and a half on top of the penal rate.
If an employee works on a public holiday and it is an otherwise working day for them (and they are not only employed to work on public holidays) they also get an alternative holiday. However, if an employee works only on public holidays (for example, an employee is only employed to work at the racetrack for the Waitangi Day meeting) they do not get an alternative holiday but must still be paid at least time and a half for the hours they work on a public holiday.
If an employee’s pay day falls on a public holiday, the employee should check their employment agreement, or ask their employer if they will be paid before or after the public holiday. An employer must pay the employee:
- for a public holiday in the pay that relates to the pay period in which the holiday falls
- for an alternative holiday which is taken, in the pay that relates to the pay period in which the alternative holiday is taken.
Public holidays rights for employees
Calculating public holiday pay
If an employee works on a public holiday, they should be paid based on relevant daily pay (rather than average daily pay). This is because:
- employers will always be able to work out relevant daily pay when the employee actually works on the public holiday
- employees generally expect to be paid relevant daily pay
- using relevant daily pay (where this can be calculated) will always comply with the Holidays Act 2003.
Holidays Act 2003 - New Zealand Legislation(external link)
If an employee work on a public holiday, they must be paid at least the higher rate of:
- their relevant daily pay for the time worked on the day, not including any penal rates, plus half that amount again (time and a half), or
- their relevant daily pay for the time worked on the day, plus the penal rates in their employment agreement.
Employees must also be given an alternative holiday if it's a day they would otherwise be working – unless they are employed only to work on public holidays.
For unworked public holidays
For unworked public and alternative holidays, employees are paid at the rate of relevant daily pay except in two specific circumstances where an employer may choose to use the ‘Average daily pay’ rate.
Working on Easter Sunday (not a public holiday)
If an employee works on Easter Sunday, they will generally be paid their ordinary rate of pay for a Sunday unless they have agreed to a different rate with their employer.
If an employee does not work on Easter Sunday:
- because their workplace is closed because of shop trading hours restrictions, and
- Sunday is a normal day of work (otherwise working day) for them, then
what they get paid for that day will depend on the terms and conditions of their employment agreement. Usually, if an employee can work on a day that is a contracted day of work for them, then the employer has to provide them with work for that day. If the employer does not provide the employee with work (for example, stocktaking while the shop is closed) they may have to pay the employee what they would have been paid if they had worked that particular day (unless the employment agreement says otherwise).
Alternative holidays
An employee gets an alternative holiday for working on a public holiday that otherwise is a working day. If an employee had to work on a public holiday, an alternative holiday gives them a day off at another time. Some people call alternative holidays ‘lieu days’ or ‘days off in lieu’ but those terms can also refer to other types of leave, so it is recommended to call alternative holidays by their correct name.
Pay for taking alternative holidays
An employee is paid at least their relevant daily pay (or may be paid average daily pay if applicable) for the hours that they would have worked on the day they take the alternative holiday. For example, an employee gets an alternative holiday for working three hours on Easter Monday and they take their alternative holiday on the following Friday (and they would usually work eight hours on a Friday). The employee must be paid the amount that they would have received had they worked on that Friday, that is they would receive pay for 8 hours.
Payment for alternative holidays taken must be made in the pay for the period when the holiday is taken.
Alternative holidays may be paid out
If an employee does not take an alternative holiday within 12 months of becoming entitled to it, the employee and employer may agree for the alternative holiday to be paid out. The payment amount must be agreed by the employer and employee and must be made as soon as practicable once the agreement has been made.
Alternative holidays remaining at the end of employment
Alternative holidays do not expire. Unless they have been taken or paid out the employee is still entitled to them. If an employee is entitled to an alternative holiday that they have not taken when they leave their employment, they are paid out for the alternative holiday at the rate of their relevant daily pay (or average daily pay if applicable) for their last day of employment. The payment must be made in the pay for the final period of employment.
Final pay has information when an employee is leaving employment and their employer calculates their final pay.
Public holiday scenarios
It will be helpful to check our Mondayisation of public holidays flowchart to determine which day the public holiday will be observed for the employee. The guide below has more information on public holiday entitlements if it is an otherwise working day for the employee or not.
If a public holiday day is an otherwise working day for an employee, then the employee gets:
- paid at least time and a half for the time worked on the day
- paid their on-call allowance (if applicable and on call)
- a full day’s alternative holiday (unless the employee is only employed to work on public holidays).
If a public holiday is not an otherwise working day for an employee, then the employee gets:
- paid at least time and a half for the time worked on the day
- paid their on-call allowance (if applicable and on call).
If an employee does not work on the public holiday, and it is an otherwise working day, the employee gets paid their relevant daily pay or average daily pay (if applicable) and the day off. If the employee does not work on the public holiday, and it is not an otherwise working day, the employee does not receive anything.
If an employee is on call on the day, which is an otherwise working day for the employee, but does not get called out (that is, the employee does not work on the public holiday), then the employee gets:
- paid their relevant daily pay or average daily pay (if applicable) for the day
- their on-call allowance if applicable
- an alternative holiday if they have had to restrict their activities to the extent that they did not get a day off.
However, if an employee is on call on the day, that is not an otherwise working day for the employee, then the employee gets their on-call allowance (if applicable).
Ella is a salaried employee who works the same hours each day and the same days each week. In her case, her employer works out her daily rate by dividing her annual salary by 52, and then by the number of days worked each week. Ella’s gross salary is $52,000 per year and she works five 8-hour days per week:
- her weekly pay is $1,000 (52,000/52)
- her relevant daily pay is calculated at $200 (1,000/5)
- time and a half of the relevant daily pay is $300 (200 x 1.5).
Ella is paid for the time she actually worked on the public holiday based on $300 per day. For example, if she works only half a day, she gets paid $150 (half of $300). Ella would also get a full alternative holiday if she would have normally worked on the day, no matter how many hours she worked on the public holiday.
Rima has regular hours each week and is paid an hourly rate and no additional payments. Her employment agreement says: “The pay rate for this position is $26 per hour. For time worked on a public holiday, the pay rate is time and a half.”
Rima will get paid $39 ($26 x 1.5) for each hour she works on the public holiday.
Jane usually only works on Saturday and Sunday, but she agrees to work on Labour Day this year even though she would not otherwise work on that day. She is normally paid $25 an hour, but her employment agreement says she will be paid $35 an hour and get an alternative holiday if she works on a public holiday.
Under the Holidays Act 2003, the minimum Jane will get paid for working a public holiday is $25 x 1.5 = $37.50 per hour. Because this is more than the $35 per hour for working on a public holiday stated in her employment agreement, she must be paid $37.50 an hour. Jane does not qualify for an alternative holiday under the Holidays Act 2003 (because Monday is not an otherwise working day for her) but she gets an alternative holiday because it is stated in her employment agreement.
Pete works on an ANZAC Day that falls on a Sunday (Sunday is a normal working day for Pete and his employment agreement requires him to work on public holidays). Pete normally earns $27 an hour and his employment agreement gives him double time for working on a Sunday.
Under his employment agreement, Pete will get 2 x $27 = $54 an hour for the time he works on ANZAC Day.
Under the Holidays Act 2003 the minimum Pete will get is $27 x 1.5 = $40.50 an hour for the time he works on ANZAC Day.
Pete gets more under his employment agreement than the Holidays Act 2003 so he will be paid $54 an hour (he’ll also get an alternative holiday because Sunday is an otherwise working day for him).
Karim works four days per week and his hours vary between 6 and 9 per day. He is off sick for a day (that he would usually work) and is entitled to sick leave. Karim’s varying work pattern means that his employer cannot work out his relevant daily pay. Therefore, average daily pay should be used (for his public holidays, sick and bereavement leave and alternative holiday entitlements).
The formula to calculate Karim’s average daily pay is:
- total gross pay for 52 weeks = $47,216
- whole or part days worked (includes paid holidays or leave) = 208 days
- average daily pay = $47,216 divided by 208 days = $227.
Matt works part-time for an average of 16.5 hours per week across 3 shifts. The days of the week he works and the length of each shift varies from week to week. He does not have penal rates for public holidays or Sundays in his employment agreement.
Sunday is a public holiday and Matt is rostered to work for 6 hours. Matt’s relevant daily pay is easy to calculate because he is working on the day (although his employer could choose to pay him average daily pay because his daily pay varies in the period).
Matt is paid the portion of his relevant daily pay for the hours he works (that is 6 hours at his hourly rate), multiplied by one and a half. He will also receive a paid alternative holiday.
If Matt’s employment agreement gave him double time for working on a Sunday or a public holiday (penal rates), then both calculations would need to be done. Matt would be paid the greater of:
- the portion of his relevant daily pay (not including any penal rates) that relates to the time he works, plus half that amount again, or
- the portion of his relevant daily pay that relates to the time he works (including his penal rate provision of double time).
In this situation, because double time will be greater than time and a half, Matt must be paid his double time.