Final Pay Confusion
January 11, 2016
It’s been a while since we’ve aired our disillusionment with the Holidays Act. We’ve come across an issue recently that raises a couple of interesting points.
An employee was unhappy with the final pay they received. They thought they were entitled to be paid for public holidays after their finish date. Rather than discussing with their employer they took to social media to air their discontent.
It’s true that any annual leave entitlements can cause an end date to be extended and public holidays within that period must be paid for. However the employee had only been employed for a few months so was not entitled to any leave. The pay was correct.
A fundamental issue with the Holidays Act is that it is too complicated for employees themselves to have any real understanding of their entitlements. This is particularly the case with final pays which we find ourselves spending a lot of time explaining.
So the employee had an incomplete understanding of the complexities of the Holidays Act, and consequently the employer is unjustly hauled across the hot coals of social media.
I would certainly suggest employers run through the payslip for a final pay with their employees as part of their termination process. Have the appropriate NZ At Work web pages on hand, and understand how holiday pay and annual leave work.
Let’s take a closer look at those public holidays added to a final pay. Say we have two employees, Albert and Barney, both employed on December 23 2014 on identical contracts. Neither take any annual leave in 2015, then both finish their employment, Albert on December 22 and Barney on December 24. Aside from those two days extra that Barney has worked their final pays should be pretty much the same right?
Nope. Albert has finished before his leave anniversary so his holiday pay is paid out as 8% of his earnings and no public holidays are added to his final pay.
Barney on the other hand has crossed his leave anniversary so he has become entitled to his four week’s annual leave. Consequently he needs to get the four public holidays for Christmas and New Year added to his final pay. So Barney is getting paid four days more than poor Albert.
That’s an extreme example, but it’s one of many anomalies that could be rectified by simplifying the Holidays Act as we’ve described in previous blogs – see the following if you’re interested: