How Annual Leave and Holiday Pay Work

Initial Twelve Months

During the initial 12 months of employment an employee has no annual leave due. Most employers will allow employees to take annual leave during this period regardless, but any leave would be taken in advance. If the employee finishes their employment prior to being employed for 12 months they are paid out their Holiday Pay Due balance in their final pay, which is typically 8% of their gross earnings. The value of any leave they have taken in advance will then be deducted from their final pay.

As the initial 12 months of employment progresses, the employee's Holiday Earnings (gross earnings) will increase along with their Holiday Pay Due balance.

Employment Anniversary

Once the employee crosses their first employment anniversary they then become entitled to annual leave and the following will occur:

• 4 weeks of annual leave become due and are added into the employee’s Current Leave Due balance.
• The Holiday Earnings, Holiday Pay Due and Estimated Leave in Advance balances are set to zero.

This process will then repeat with the employee's Holiday Pay Due balance accumulating until they cross their following employment anniversary or finish employment.

General

At any particular time an employee is owed two separate amounts - Holiday Pay Due and Current Leave Due. If the employee finishes employment after crossing their first or any subsequent anniversaries, they will be paid out the Holiday Pay Due accrued for the current entitlement year since the last anniversary, plus any Current Leave Due remaining from previous years. See MBIE’s Website for additional details on processing Leave and Holidays in a Final Pay or our support article on Final Pay.

Holiday Pay Due is typically 8% of gross earnings and is shown in PayHero as a dollar amount. Current Leave Due is always stored in weeks but can be viewed in either days or hours if the employee's work pattern or pay history includes enough detail to display a conversion.

The fields on the employee's Leave tab are as follows:

Holiday Earnings - The employee's gross earnings from their Holiday Pay 'Since' date, excluding any earnings that aren't eligible for Holiday Pay.

Holiday Pay Accrued - Typically 8% of the employee's earnings since their Employment Start Date or Holiday Pay 'Since' date.

Pay As You Go - This checkbox will cause an employee to be paid out their 8% Holiday Pay in each pay. It will also pay out any outstanding Holiday Pay Due in their next pay. Learn more about Holiday Pay As You Go here. 

Holidays Paid Out - This will appear for employees on Holiday Pay As You Go, once the Pay As You Go checkbox is ticked and shows the amount of Holiday Pay currently paid out.

Holiday Pay Due - The Holiday Pay amount, less any Holidays Paid Out, that would be owed to the employee if their employment finishes.

Current Leave Due - Annual leave due less any annual leave taken since the last anniversary. This is the leave balance that will be paid out in a final pay, along with Holiday Pay Due.

Estimated Leave in Advance - Found by clicking the  button on Holidays Due, this balance is an estimate of how much leave in advance the employee could take for the current entitlement year.

Note - Annual Leave Taken is included in gross earnings balances, so when an employee is paid for annual leave taken their Holiday Pay balance will increase. It may seem as though you're double paying here, however, when an employee takes annual leave they are still employed with you and should continue to accrue annual leave.