New Zealand: Holiday pay calculations; avoid errors

New Zealand: Holiday pay calculations; avoid errors

There are numerous stories in the media about employers making holiday pay calculation errors. It appears tens of thousands of employees may be affected.

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The calculation of holiday pay is based on a formula in the Holidays Act 2003, that employers (and their payroll providers) may not be applying correctly—in particular, employers with employees who have irregular work patterns (e.g., part time, casual or shift workers). It is also necessary to consider whether discretionary payments to employees, public holidays and sick and bereavement leave have been appropriately accounted for in the holiday pay calculation. 

KPMG observation

To give comfort to management and others, including employees, that holiday pay is being calculated correctly, independent consideration of these calculations may be considered. The holiday pay calculation is only one of a number of components of a payroll system. The accuracy of PAYE, ACC, and KiwiSaver deductions and correct classification of benefits (e.g., commissions, bonuses and non-cash amounts) are also important. Therefore, employers need to evaluate their payroll processes and practices. 

 

Read an April 2016 report [PDF 516 KB] prepared by the KPMG member firm in New Zealand: Navigating Holidays Act issues

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