Holiday Pay Calculations

As seen through the media recently, errors within holiday pay calculations are more common than we’d like to think and not just limited to Government organisations. Due to the complexity of the calculations required to monitor and record holiday pay, errors or deviations from the Holidays Act 2003 (the Act) requirements can occur.

This can result in under or overpayments to staff. Common payroll mistakes include:

• Incorrect leave payments for employees returning from paternity/maternity leave.
• Systems incorrectly calculating the amount of leave paid based on hourly rates instead of daily rates (bereavement, alternate, public holiday and sick leave) or weekly rates (annual leave) as required by the Act.
• Previous allowances earned are not included in leave payments (i.e. underpayment).
• Discretionary payments (e.g. bonuses) are included in leave payments (i.e. overpayment).
• Time-and-a-half earned on public holidays is not included in subsequent leave payments (i.e. underpayment).

Employee leave entitlements and payment errors are likely to be miscalculated if the information captured within a system is not adequate. Staff members with fluctuations in their normal hours worked are prone to holiday pay mistakes, with the most commonly affected being waged employees.

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