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Do your employees understand their final payslip?

Under the current complex arrangement in the Holiday’s Act 2003, for annual leave and holiday pay, final payslips can be a complete mystery to employees.

In fact, the need to explain in detail has become the normal procedure for any termination process, and the confusion hinges around the adding of annual, alternative and public holiday pay to final pay (or not, as the case may be) and the compliance with the Holidays Act.

Here are some facts that may help with understanding that final pay.

  • An employer may have given better entitlements than those required in the Act.
  • An employee becomes entitled to annual leave holidays after 12 months of working.
  • After the 12-month anniversary has passed – any remaining annual holidays that the leaving employee is entitled to (they may have taken some in advance) are regarded as being taken immediately after the date their employment ends.
  • If a public holiday occurs within this annual leave period added on, then the employee must be paid if the public holiday is on what was a normal working day for them.
  • This means that the public holiday is added on to their annual leave period for the calculation of their final pay – even this ‘add-on’ can create another entitlement for yet another public holiday (e.g. around the Christmas period).
  • And, if during this ‘added on’ period, another public holiday occurs, they will be entitled to payment for that as well.
  • The employee may have been granted alternative holidays because they worked on a public holiday – if these are unpaid or untaken at the time they leave, these must be paid out at the applicable rate in their final pay.
  • Sick leave or bereavement leave payments are not part of the legal requirements, but some employers choose to pay out part or all unused sick leave entitlements.
  • The points above do not affect an actual end date for employment, just the calculation of final pay.
  • Where an employee has not completed their 12 months’ service, they are not entitled to annual holidays yet, so if they leave there are no issues, final pay is final pay for hours worked and an annual payment of 8% of their gross earnings from the start of their employment – if annual leave has been taken in advance or paid for (pay-as-you-go), this amount is deducted from their gross earnings.

It is strongly recommended that employers keep accurate records for each employee’s wages and time, holiday and leave records and if judgements or agreements are required, these must meet the ‘good faith’ principles of the Employment Relations Act (2000).

It is also recommended that your calculations are explained and agreed with the employee at their final leaving meeting, to avoid any later issues.

Useful resource: https://www.employment.govt.nz/ending-employment/final-pay/


Don’t hesitate to ask questions! Email payroll specialists directly admin@flexipayroll.co.nz or call at 0800 88 70 70.

You can also go to FlexiPayroll Website for more info.