Holiday Pay Advice Guide

16 April 2019

All employees are entitled to holiday pay in respect of any annual leave taken and such pay shall:

  • Be paid in advance of the employee taking their leave.
  • Be at a rate equivalent to the employee’s normal weekly rate.
  • Include compensation for board and lodgings where that employee received board and lodgings in the course of their employment.

Is annual leave accruing?

A lot of employers have queries around whether annual leave is accruing while staff are laid off during the COVID-19 crisis. If you have had to lay-off staff temporarily, these employees will not accrue annual leave while they are not working.

Remember though that if staff later complete 1,365 hours of work during the leave year despite being laid off during the year, they remain entitled to 4 weeks’ paid annual leave.

Likewise, if employees are being paid through Government wage subsidy programmes but are not in fact working, they do not accrue statutory paid annual leave.

Calculating pay

If an employee works on a time-rate, fixed-rate or salary, then their normal weekly pay would be equal to the weekly remuneration they received when they last worked before the annual leave commenced. This payment would include any regular bonus or allowance that does not vary and would also include regular rostered overtime. For employees who work on commission or on a piece-rate, the normal weekly rate is calculated as the average weekly pay over the 13 week period preceding the annual leave.

Generally speaking, it's fairest to use this 13-week average method for those employees who work variable hours. Time spent on annual leave, maternity leave, parental leave, force majeure leave, adoptive leave and the first 13 weeks of carer’s leave is included as time worked when calculating an employee’s holiday entitlement. 

Employers should be aware that it's not deemed acceptable to pay an employee a ‘composite rate’ whereby their holiday pay is paid off in a piecemeal fashion through the employee’s weekly, fortnightly or monthly pay. The employee is entitled to receive their holiday pay at the time they actually take their annual leave.

Need help with holiday pay?

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