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Navigating the Holidays Act

The way that businesses employ staff is changing. If your employees work set days and hours days each week without variation then the Holidays Act 2003 will be easy to apply. However, more and more employees these days are working variable hours, casual or on call, or working extra hours as they come up. These scenarios make applying the Act much more challenging and quite a few businesses have been caught out over the last year or so.

In response to this, the Ministry of Business, Innovation and Employment has released a guidance document:


Now, while it is 52 pages long, it’s important to get this right. The Guide provides some specific advice and calculations to help employers and employees reach a good faith consensus in cases of variable work hours. The main issues to be determined are: what are the ordinary weekly days and hours of work, and what is the ordinary weekly pay. The Act is more concerned with the actual hours and days worked than with the labels applied to the work (for example casual) when working out what is ‘ordinary’.


Here are some of the main points from the Guide:

 You have a minimum entitlement to four weeks annual holidays off work for rest and recreation after 12 months continuous employment with your employer (though your employer can agree to offer more). The intent is that, if you took all your entitlement in one year, you would have had a total of (at least) four calendar weeks off work

 If it is not immediately clear from your work pattern what your entitlement should look like, your employer should discuss this with you in good faith – including talking through the implications of different choices – so that you can reach an agreement. Your employer cannot simply impose an approach to annual holidays on you without discussion.


It is often less costly overall to err on the side of benefit to the employee than to be too miserly and create employee dissatisfaction.

Using a computerised Payroll system is vital in helping get these calculations right and minimising the risk to you – the employer. “ I challenge anyone to even calculate correctly the average weekly earnings (required for paying annual leave) manually” says Kerrin O’Regan, Director of Green Mouse Computing Limited.

If you are currently running a manual Payroll system, call Kerrin on 07 8277119, for free advice on choosing the correct computer Payroll system for your business.


Gina Whyte