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Sorry, little unsure as to what countries Payroll you are referring to, whether it is New Zealand or Australia. However I have include an answer to both for you.
A new employee will get 8% of their gross earnings accrued as holiday pay. If the employee has been there for more than 12 months (1 year) their holiday pay is removed and their annual leave entitlement is added. Allowing the holiday pay calculation would start again. The Show Me video: Manage annual leave and holiday pay explains that in a little more detail.
If the employee is a full time employee you would generally only pay the holiday pay out when the employee leaves the company, otherwise you would be using annual leave to pay them out - even if they haven't reached the 12 months.
As far as I am aware you can pay out the holiday pay to an employee at any stage, it does have to be agreed upon. However it is worth recommend checking with Fair Work Australia or a similar organisation to ensure that is the case.