Payroll - Making the difficult seem easy.

Have you ever sat at your desk scratching your head trying to calculate your employees entitlement to annual leave when they don't have a set roster or pattern of work and before you know it the day is over?

The Holidays Act 2003, which governs New Zealand legislation, states all New Zealand employees are entitled to a minimum of 4 weeks of annual leave.  **There are some exceptions to this rule.

Although annual leave is a weekly entitlement in legislation, most payroll systems will record in days or hours for ease of use.

To calculate an employees entitlement the formula is simple - the employees profiled hours or days multiplied by the weeks of entitlement.  

For example when an employee works 3 days per week, then their entitlement will simply be 12 days per year (3 days x 4 weeks).

It gets a little more tricky if your employee works say 11 days on and 3 off as is common in the agricultural sector.

To calculate this divide 365 (days of the year) by the amount of days in the pay cycle. 

In this example it would be 365 / 14 (11+3).  This has calculated the amount of pay cycles in each year.  26.07 is the amount of pay cycles in the year which we now multiply by the worked days (11).

26.07 pay cycles x 11 working days = 286.77.  This has calculated the working days in the year.

Now divide this by 52 weeks to calculate the average hours per week.  Let's work this out...286.77 / 52 = 5.51 average days per week.

We simply multiply these average days per week by the weekly entitlement.  So for this example we are going to use the minimum of 4 weeks.

5.51 days x 4 weeks entitlement.  The result is 22 days of entitlement per year.

The employee will receive the entitlement after 12 months of continuous employment.  Up until that date the employee is simply accruing leave...

What's the difference?  Well my dear reader that is the subject for my next blog.

Stay tuned...