New Zealand Payroll

Everything you need to know about paying your NZ based staff

More Public Service Payroll Problems

09 March 2016- 10 min read

There have recently been reports in the media that Police and the Ministry of Business Innovation and Employment (MBIE) have got issues with their payroll. This is particularly embarrassing to MBIE as they are responsible for the administration of the Holidays Act.

See the NZ Herald story here, and Newstalk ZB's story here

What is the problem?

There has not been any public disclosures describing the exact issue, the description has been that “staff have been paid the wrong amount in holiday entitlements.” The issue is being blamed on “very complicated” law changes.

What has gone wrong

The Holidays Act is complex, there are two different types of holidays and four rate calculations definitions as summarised below:

  • Annual Leave
    • Ordinary Weekly Pay
    • Average Weekly Earnings - last 52 weeks earnings / 52
  • Other Leave, this includes: Sick, Bereavement, Public Holidays, Alternate Public Holidays
    • Relevant Daily Pay - what an employee would have earned had they worked that day
    • Average Daily Pay - last 52 weeks earnings / number of days paid in last 52 weeks
There is also room for interpretation on how much Annual Leave an employee will become entitled to at their Employment Anniversary when they work variable hours. There are further issues when Parental Leave is added to the mix.

All in all I agree that the Holidays Act is too complicated and needs to be simplified.

What KeyLink does to combat this complexity

We work with our customers to come up with payroll solutions that meet their needs. For most clients we recommend the following:

  • Annual Leave
    • Where employees have fixed hours – use these as the base for all calculations
    • When employees have variable hours – use these as the base for all calculations. This may need a special clause in your Employment Agreements.
  • Other Leave
    Use Relevant Daily Pay

We can and do support many different methods of calculating holiday pay rates and entitlements including Average Daily Pay.


You know if you trust KeyLink with your payroll processing that we will:

  1. Work with you to ensure you know your responsibilities to your employees.
  2. Work with you to determine the best leave calculations for your employees.
  3. Help you with drafting leave clauses in employment agreements.

We do all of this so that you don't need to worry about leave calculations and can get on with running your business.


About the Author

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Evan Lyon

Evan Lyon

KeyLink owner, 25+ years experience in designing, building and running mission critical IT systems. More than 12 years experience supporting and using payroll systems.


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