Annual leave/final pay during parental leave

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CK1
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Annual leave/final pay during parental leave

Hi

I have a NZ senario whereby we have sold a business whilst someone is on parental leave and need to work out her annual leave entitlements.

 

The staff member went on parental leave at the end of March 16 and at the time had 8 hours of accrued leave owing since Nov15 her employment anniversary.  She had no annual leave due.

 

Prior to this the staff member used to work a 40 hour week, however in Feb16 she reduced down to 4 days per week at 32 hours.

 

As its November again her annual leave anniversary has rolled around and her leave entitlements are now 128 hours per annum.   One week later we have sold the business, whereby she will be employed and will come back to work with a new employer.

 

To pay out her annual leave entitlements do I pay her at the 12 month average pay rate which is a reduced rate than her normal pay rate as she has only earned wages 4/12 months of the year.  Or is it at her normal pay rate?  Please confirm.

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Ultimate Partner jenniek
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Re: Annual leave/final pay during parental leave

Hi there @CK1

With parental leave, the entitlement rolls over as usual - at the normal hours per week - as you have said, however the rate of pay for this is much lower than her normal rate of pay - as it is the $ earned during the last 12 months divided by 128 hours - so could only be a few $ an hour. You would pay her this amount of money - not her ordinary rate of pay - parental leave is the only exception where the employee is paid at less then the normal rate of pay. It is assumed that an employee will not take holidays as sdoon as they return to work, and that over time the hourly rate will increase - by the end of 12 months back at work, the annual leave rate of pay returns to normal. The 12 month average pay rate is correct. If you check the IRD website you should find a link about how to pay annual leave after parental leave.

Regards,
Jennie Kingma
JK Business Systems Ltd, Hamilton, NZ
Email: jennie@jkbusiness.co.nz
CK1
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Re: Annual leave/final pay during parental leave

Thankyou for your response.

 

We have a couple of things going on, which you answered the rate to pay her annual leave out at - thankyou, however for part of the year 3 months (Nov15 to Feb16) she was doing 40 hours, and then the next month (Mar16) before she went on parental leave she reduced to 32 hours per week and is coming back on 32 hours per week under new ownership.  Do I need to adjust anything for when she worked the 40 hours as MYOB payroll has calculated her leave out at 128 hours due (32 hrs per week) for the year to Nov16.

Many thanks

 

CK1
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Re: Annual leave/final pay during parental leave

Just to double check - it is correct to use the 12 month average pay rate for the final pay?

Thank you

Ultimate Partner jenniek
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Re: Annual leave/final pay during parental leave

Hi there @CK1

Yes - you need to manually adjust her annual leave entitlement slightly by the amount of time she worked 40 hours per week. Working 40 hours a week accrues leave at 3.0769 hours per week (160 hrs entitlement divided by 52 weeks) and working 32 hours a week accrues at 2.4615 hours per week. You may need to increase the annual entitlement slightly to allow for the time spent working at 40 hours per week.

Regards,
Jennie Kingma
JK Business Systems Ltd, Hamilton, NZ
Email: jennie@jkbusiness.co.nz
Ultimate Partner jenniek
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Re: Annual leave/final pay during parental leave

Yes - if you have entered in the Parental leave dates on the Other Leave tab of the Leave details screen, then MYOB Payroll should work out this rate for you. Otherwise you will need to calculate this yourself. But yes - annual leave is paid at the average of the last 52 weeks - when they go on holiday. In this case the average rate will be less than the ordinary rate of pay.

I have attached a support note written a few years ago which might help you.

Regards,
Jennie Kingma
JK Business Systems Ltd, Hamilton, NZ
Email: jennie@jkbusiness.co.nz

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