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Holidays Act

A Holiday Pay Nursery Rhyme

March 30, 2016

Sam

Payroll expert at FlexiTime

2 minute read

Jack and Jill started at the same time working at Pail & Co. They arranged to work part time, doing 2 days a week at $50 / hour, or $800 / week.

After a year they decided to quit their jobs and take some time to do some trekking. To save up a little more money they started working 5 days a week for the last month.

Jack quit just before his leave anniversary. Jill worked a couple more days, crossing her leave anniversary.

When they received their final payslips they were in for a bit of a surprise. Despite working almost identical hours for the same pay, the pay out for their leave differed dramatically.

Since Jack hadn’t crossed his leave anniversary he was paid 8% of his earnings. For 16 hours a week for 11 months, and 40 hours a week for the last few weeks he received 8% of $45,400 = $3,712. He was happy with that. Until he saw Jill’s payslip.

Because Jill had crossed her leave anniversary, her 4 weeks of leave had become due. Her ordinary weekly rate (the rate for the last 4 weeks) was $2,000 since she had been working 5 day weeks during that period. So for her final pay shed received 4 x $2,000 = $8,000. The simple difference between crossing the leave anniversary or not made a 215% difference to the leave paid out.

When they got back from their travels, Jack got a job with a local council testing water quality. It was a nice stable salaried job and he enjoyed getting out and about around the countryside. Unfortunately after 6 months Jack was up in the hills getting some water samples when he slipped down a bank and broke his, well, crown. He couldn’t do his job so had to go on ACC.

After five months Jack’s crown just wasn’t healing up and he wouldn’t be able to get out and continue in the same role, so Jack finished up. He hadn’t quite reached his leave anniversary so was again paid out 8% on his earnings. He’d earned $50,000 in the first 6 months so he received $4,000 holiday pay.

Had he finished employment a week or two later however, despite doing no work and earning nothing more, he would have crossed his leave anniversary. His 4 weeks leave would have been paid out at his standard rate (not to mention any public holidays that fell in those 4 weeks) and he would have received more than twice the amount in his final pay.

The sooner the concept of a leave anniversary is ditched, the better.

Sam

Payroll expert at FlexiTime

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