Paying your staff at Christmas

Paying employees for public holidays and annual holidays can be confusing.  Below are the basics to help you pay your employees correctly over this Christmas and New Year’s season.

Public Holidays – 25 & 26 December 2013, 1 & 2 January 2014

If your staff would usually work on a Wednesday and Thursday, but you don’t require them to work on these stat days over Christmas and New Year, then they are entitled to their normal (relevant or average) daily pay.

If your staff work on the public holiday they are entitled to be paid time and a half for the hours worked and also accrue one day of alternative holiday (lieu day).

If your staff are already on annual holidays over this time, the public holidays are paid separate to annual holidays.

It is possible to agree with your staff to transfer a public holiday, to assist with meeting the needs of the business or their holiday plans.  This agreement must be in writing and the staff member cannot be disadvantaged by the transfer e.g. receive less pay than they would otherwise be entitled if the public holiday was not transferred. 

When should annual holidays be paid?

Employees are entitled to receive their pay for annual holidays before the holiday commences, unless you agree with each staff member that the normal pay cycle will continue undisturbed by the time off work (this would usually be detailed in their employment agreement).

Guide to cashing up annual holidays

Your staff can request to ‘cash-up’ a maximum of one week of their annual holiday entitlement.

Cashing up annual holidays (of any amount up to one week each year) can only occur at the employee’s request.  The request must be submitted to you in writing (and you don’t have to agree).

When agreed, the annual holidays to be cashed-up should be paid as soon as possible; usually in the next pay. The payment must be at least the same as if the employee had taken the holidays.  It is taxed as a lump-sum payment and has any usual deductions such as KiwiSaver or student loan.  It’s also worth checking if any child support payments or Working for Families Tax Credits are impacted by the change of income, caused by the cash-up of leave.