In light of the COVID-19 Alert Level 4 Lockdown, many employers may be wondering what to do with their payroll for the April Public Holidays (Good Friday, Easter Monday and ANZAC Day).
Whether or not your employees are continuing to work or not, are in receipt of the wage subsidy or on reduced pay, this article aims to provide you with the background to prepare your payroll and guide you through these new and unprecedented times.
Employees Working on A Public Holiday
If an employee works on a public holiday (whether this is an employee working from home, or an essential worker coming in to the work place), they are entitled to be paid at time and a half for the hours that they work on that day.
If the public holiday is “otherwise a working day” for the employee (i.e. if it had not been a public holiday, they would have worked) then, in addition to the time and a half pay, the employee should be provided with an Alternative Day (commonly called a day in lieu) that they can use at another time. Please note; If an employee works on any part of a public holiday, a full Alternative Day must be provided to them.
Payment of the Alternative Day will be based on the Relevant Daily Pay (RDP) on the actual day they end up taking. Given this, the Alternative Day pay may therefore be paid at a higher rate than what they would have been paid had they not worked on the public holiday (e.g. If they take the day in lieu after the lockdown when they are back on full pay, or take the alternative day on a day where they usually work more hours, then they will be paid more).
Employee Not Working on a Public Holiday
If an employee does not work on a public holiday, and the day is “otherwise a working day” for the employee, then the employee is entitled to be paid for that day.
Payment should be made at the RDP for the day on which the public holiday falls (if it is possible to calculate this). Where it is not possible to calculate the RDP (i.e. if an employee works very irregular hours) then you may use Average Daily Pay (ADP) to calculate the payment due.
Otherwise a Working Day
It can sometimes be difficult for employers to identify if the day would be considered “otherwise a working day” for an employee, particularly for employees who work variable days or on a roster. So how does the employer know whether to pay the employee and grant them an Alternative Day for the public holiday?
Where it is not possible to identify if the day would be considered “otherwise a working day” employers are encouraged to follow the principles outlined in case law – namely those of Wendco (NZ) Ltd v Labour Inspector . In this case it was stipulated that employers are advised to review a 3 month period prior to the public holiday in order to identify if it would be considered otherwise a working day.
For example; If the public holiday falls on a Friday, the employer should review the employees work records to determine if the employee has worked more than 50% of the Fridays that fell in the 3 months preceding the public holiday.
If the employee has worked less than 3 months, then the entire period of their employment should be considered.
RDP and Relationship to Reduced Pay During Lockdown
Where a reduction in pay has been agreed with an employee (i.e. the employee is receiving 80% of their normal pay, or just receiving the wage subsidy rate) then this will form their new RDP in relation to the public holiday.
For example; Consider an employee who usually receives $1,000 a week (based on working 8hrs per day over 5 days). The employer has agreed with them to pay 80% of their normal wages during the lockdown period i.e. $800.
If the employee does not work on the public holiday they would be entitled to $160 as their RDP ($800 / 5).
If the employee does work a full day on the public holiday, they would be entitled to time and a half ($160 x 1.5 = $240), and an alternative day.
Leave Without Pay
If an employee is not working, and is on leave without pay, the standard expectation would be that the employee would not be paid for any public holidays that fell during the period of leave (as, if but for the day being a public holiday, there would be no expectation that the employee would have worked).
The Ministry of Business Innovation & Employment (MBIE) have released guidelines for employers who have employees on unpaid leave (i.e. Not working) strictly as a result of the COVID-19 lockdown.
Employers are advised to look at the pre-COVID-19 work pattern for their employees, to determine if the public holiday wold have been ‘otherwise a working day’ for the employee, with consideration being given as to the reason for the leave without pay being taken by the employee.
We encourage you to seek advice from your financial advisor and employment lawyer if you are unsure as to whether the day would be considered otherwise a working day for your employees and therefore what level of payment would be due to them.