Holiday Pay can be paid with an employee's pay when an employee is on a fixed term contract of less than 12 months, or when they work on a basis that is so intermittent or irregular that it is impracticable for the employer to provide the employee with 4 weeks’ annual holidays. This is known as Pay As You Go. For information about when Pay As You Go provisions can be used please refer to the MBIE website.
To set an employee to receive their Holiday Pay on a Pay As You Go basis in PayHero, view their record under Manage > Employees.
Ensure the employee's normal rate is exclusive of holiday pay, and the Holiday Pay % on the employee's Leave tab is set appropriately (usually 8%). On their Leave tab select the check box Pay As You Go under the Holiday Pay settings to include the employee's holiday pay with each pay.
Once an employee is set to receive Holiday Pay As You Go, the appropriate amount will be automatically calculated by PayHero each time a pay is created.
Changing from Permanent to HPAYG
There are two situations in which you will need to change an employee from accruing Holiday Pay to being on Holiday Pay As You Go:
- Where the employee has been on a permanent contract and is changing to HPAYG.
- Where the employee should have been on HPYG from the start of their employment, but didn't have the setting applied.
In these situations, there are two options for processing the payment of accrued Holiday Pay. The correct approach will depend on the amount to be paid out.
To Apply Lump Sum Tax: If employees have been accruing Holiday Pay for some time, it's arguable that lump sum tax should be applied to these payments. This can be achieved by setting the employee's next pay as a Final Pay, processing the pay to pay out their existing entitlements, then immediately clearing out the finish date and put them on HPAYG afterwards.
Catch-Up Pay: If the employee has relatively little Holiday Pay accrued, the approach above may not be appropriate. The second option is to go to the employee record and navigate to the 'Leave' tab. Check the 'Pay As You Go' box. This will move the value of the Holiday Pay Accrued to the Holiday Pay Paid Out balance. You can then amend the 'Holiday Paid Out' balance to be '0'.
When you next process a pay including those employees, the complete value of that Holiday Pay Accrued will be paid out. This will be greater than 8% and return a warning, but in this instance that will not be incorrect:
Whichever approach is used, after the accrued Holiday Pay has been paid out the employee will be apportioned their Holiday Pay entitlement in each pay.
Changing from HPAYG to Permanent
Learn more on what to do if an employee who is on a Pay As You Go arrangement becomes permanent here: Changing Pay-As-You-Go Employees to Permanent