Wow, how fast the year has passed us by. In a few weeks time workers up and down the country will be stopping to celebrate Christmas and the New Year with loved ones and friends.
As an employer, it is important that you get the pay entitlement right for your people over this time, whether they are working or not. There are four public holidays to cater for over the Christmas / New Year period. Christmas Day, Boxing Day, New Year’s Day and the Day after New Year’s.
Depending on your industry you may also have a planned shutdown period.
So how do you ensure people get paid the right entitlements over this period?
First up – Christmas Day and New Year’s Day. This year both Christmas Day and New Year’s Day fall on a Sunday, so this means that public holiday is transferred to the next working day. As Boxing Day and the Day after New Year’s Day fall on a Monday, that means the Christmas Day and New Year’s Day public holidays transfer to Tuesday 27th December and Tuesday 3rd January respectively.
This next bit is potentially confusing.
If you normally open on a Sunday, but are closing for the public holiday, then for those staff who would normally work on the Sunday, their public holiday entitlements will apply on the actual days of 25 December and 1 January.
If your employees would not normally work on a Sunday but would normally work on a Tuesday, then their public holiday entitlements transfer to Tuesday 27 December and Tuesday 3 January.
However, if the employee would normally work both Sunday and Tuesday, then the public holiday for these people is deemed to be the Sunday (25 December and 1 January). They don’t get the public holiday twice.
If, however you are open for business on these public holidays, then those employees who agree to work them are entitled to be paid at least one and a half times their pay for the hours they actually work (more if that's what their employment agreement states) and if that public holiday is also a day that they would normally work, they are also entitled to an alternative public holiday, to be taken at a later time.
To determine the rate of pay for the public holidays, the Holiday Act 2003 provides that an employee is to be paid their “relevant daily pay” or, in some situations their “average daily pay”.
Where your employee is salaried and works regular hours, this is a straight forward calculation using “relevant daily pay.” However, where it is impossible or impractical to determine the relevant daily pay, due to the employee working varying hours, the “average daily pay” over the previous 52 weeks can be used.
When it comes to paying employees for public holidays, your employees are entitled to be paid for the public holiday, however, you should watch out for the following issues:
Consider whether the rate paid includes regular allowances or payments outside the employee’s base rate. These payments may continue to be automatically paid outside the relevant or average daily pay calculation, but if not, they will need to be taken into account as part of the calculation.
Where relevant daily pay applies, consider whether the employee has been paid according to the hours that they are likely to have actually worked (for example, if a waged employee regularly works eight hours at their base rate but then works two hours’ overtime on that particular day of the week, the relevant daily pay payable should reflect this).
Check that your payroll system is not defaulting to a “four week look back” calculation for relevant daily pay. The Holidays Act used to provide for an averaging formula based on the last four weeks’ gross earnings, but since the average daily pay formula was introduced in 2011, this no longer applies to relevant daily pay calculations.