Leave payment calculations for public holiday, alternative holiday, sick leave, bereavement leave, and family violence leave

When your employees take a day off for a public holiday, an alternative holiday (day in lieu), sick leave, bereavement leave, or family violence leave, payment for these days off are calculated using relevant daily pay or average daily pay as per the Holidays Act. 

Relevant daily pay (RDP) means paying an employee what they would have earned if they were at work on the day. RDP includes payments such as regular taxable allowances, commissions, bonuses, and overtime payments if the employee would have received them had they worked. RDP also includes the cash value of board or lodgings.

In Smartly, the “Normal Rate” payment method is equivalent to RDP. The Normal Rate uses the employee’s basic hourly rate, plus the rate for any allowances that are normally paid per hour worked.

For example, Joe is a builder. He works 10 hours per day at $40 per hour and receives a tool allowance of $1 per hour. For Joe, his RDP is $440 and that is what he would receive if he is on sick leave for a day.

If Joe regularly works  an additional 2 hours of overtime on a Monday but is set up on Normal Rate and 10 hours per day as his standard hours in Smartly, when you do the pay run, you would need to adjust the hours up to 12 hours if his sick leave was on Monday to ensure the calculations match RDP.

Please note if your employees are on the Normal Rate setting, you must check for any additional payments the employee would have received had they worked that day and pay these amounts in order to remain compliant.  The key principle is that the employee should not receive less for the day on leave than what they would have received if they came to work.

Average daily pay (ADP) is a daily average of the employee’s gross earnings over the past 52 weeks. ADP may only be used if it is not possible to work out the relevant daily pay, or the employee’s daily pay varies in the pay period in question.

The “Last 52 Weeks Average” payment method is equivalent to ADP. This payment method is best used for employees on non-standard hours.

For example, Jane is a waitress. Her hours vary daily, but she works a minimum of 20 hours per week. The Last 52 Weeks Average will use Jane’s gross payments from the last 52 weeks divided by the total hours paid to determine an average hourly rate. Smartly multiplies this figure by the average hours worked per day over the same 52 week period to determine the pay for her day of sick leave. 

The average hourly rate multiplied by the average hours per day results in the equivalent ADP calculation.  It is important that these figures are not manually changed in order for the calculation remains compliant.  

Where there are some situations when you may use either RDP or ADP, Employment NZ recommends that you use RDP if the RDP is straightforward to work out.

For example, Jill works as a cleaner. She works a total of 30 hours per week, but are rostered to do different hours on different days. On Friday when she was sick, she was rostered to do 6 hours. In this case, RDP will be used and she will be paid 6 hours for her day of leave. 

For more information about relevant daily pay and average daily pay, please refer to the Employment NZ website.