Pay Types for New Zealand Leave Processing
The NZHA requires that employers use specific calculations to determine an employee's pay rate for leave time. Many of these calculations are based upon the employee's gross earnings. New Zealand has specific regulations regarding the types of earnings that are included in an employee's gross earnings. Therefore, to ensure that calculations are accurate, you must specify which pay types are included in the employee's gross earnings.
You must set up leave pay types for each type of leave that the organization gives its employees. For example, you might set up pay types for sick leave, annual holiday leave, and bereavement leave. When you set up a leave pay type, you must set the Auto Pay Method field to S. Auto Pay Method S specifies that the system subtracts leave time at the employee's regular rate, but adds it back at a different rate.
For example, if an employee normally is paid for 40 hours per week, and takes 8 hours of leave time, the system would subtract 8 hours of time, at the employee's regular rate, from the 40 hours that would normally be generated by autopay during the payroll cycle. Then, after the leave pay rate calculation is complete, the system adds 8 hours of leave time, at the calculated rate, to the employee's pay.
After you set up these pay types, you must associate them with the appropriate leave type codes in UDC (75/LT). The system uses these codes to determine which calculation to perform to arrive at the correct leave pay rate.
After you set up pay types for employee leave, you must also attach the pay types to the associated leave accruals to ensure that the available leave balance is adjusted when an employee is paid with a leave pay type.
Under certain circumstances, employers can pay employees for annual holiday leave time on an ongoing basis and include the payments with employees' regular pay. Employers can pay employees in this manner if one or more of these are met:
The employee is employed on a fixed-term agreement that is scheduled to last less than 12 months.
The employee works on a basis that is so intermittent or irregular that it is impractical to provide three weeks of annual holiday leave.
The employee agrees in their employment agreement to receive leave pay with regular wages, provided that it is paid as an identifiable component of the employee's earnings and is paid at a rate of no less than six percent of gross earnings.
If the organization chooses to include annual leave with regular pay, you must set up a pay type for annual holiday pay. This pay type must be set up to print as a separate item on the employee's payment advice. Additionally, it is not necessary to associate this pay type with an accrual.