Calculating annual holiday pay

All employees have minimum entitlements to annual leave. There are three steps when calculating how much holiday pay an employee is owed:

  1. Work out the weekly average of your employee’s total gross earnings by dividing the “total gross earnings” for the 12 months before the end of the last pay period before the annual holiday by 52. This gives the “average weekly earnings”.

    Note: “total gross earnings” means all salary, wages, overtime pay, allowances, commission, and any previous payments for holidays and leave in the period during which the earnings are being assessed.

  2. Then work out what the “ordinary weekly pay” is (as at the beginning of the annual holiday) by multiplying the ordinary hourly rate of pay by the number of hours the employee normally works each week. This gives the “ordinary weekly pay”. (See below for more detailed information on ‘ordinary weekly pay’.)
  3. Whichever of these amounts is the LARGER becomes the rate of the weekly holiday pay.

For example

  1. Elizabeth is taking annual holidays in October.  Her total gross earnings for the year October 2009 to October 2010 were $32,000. Dividing this by 52 gives average weekly earnings of $615.38.
  2. However, Elizabeth’s hourly pay rate is $15.50 per hour and she usually works 40 hours per week, so her ordinary weekly pay at this time is $620.00.
  3. The larger of these two amounts is her weekly holiday pay. Therefore, Elizabeth’s holiday pay for each week of the holiday is $620.00.

Part-time workers also get paid holiday pay. You and your employee need to agree on what a week means for them.  For example, if John works part-time 16 hours per week, you may both agree that John’s entitlement is calculated as 4 weeks of 16 hours, which is equal to 64 paid hours of holiday pay, or 8 days of paid holiday pay.