Christmas Payroll in New Zealand: What You Actually Owe

Four public holidays in ten days, mondayisation, closedowns and a workforce that is half on leave. Christmas is where New Zealand payroll earns its reputation.

Christmas payroll is not conceptually hard. It is just that four public holidays land inside a fortnight, half your team is away, the person who normally runs the pay run is also away, and the deadlines move because of the bank holidays. Errors made in December tend to surface in February, by which point the pay run that caused them is three pay runs back and the person who could explain it was the one on leave.

Here is what you actually owe, in the order you need to think about it.

The Four Public Holidays

Over the Christmas and New Year period New Zealand has four public holidays: Christmas Day, Boxing Day, New Year's Day and the day after New Year's Day.

All four sit in the group that can be transferred, but transfer is not automatic and it is not a property of the holiday. It depends on the employee. A day only moves when it falls on a Saturday or a Sunday and that day is not one the person would otherwise have worked. Land it on a weekday and it stays put: a Christmas Day that falls on a Friday is simply a Friday public holiday, for everyone.

Where a day does move, section 45 sets the destination rather than any general next-working-day rule:

So the same public holiday can be observed on two different dates inside a single pay run, depending on each person's working pattern. If you employ people who do work weekends — hospitality, care, retail, security — you will be running both patterns at once. That is normal, and it is exactly where manual processing goes wrong. Nobody ends up with more than four of these days, however the calendar falls.

The pattern changes every year, so confirm the observed dates against your own working patterns before you set the December cut-offs, rather than carrying last year's dates forward.

Is It an Otherwise Working Day?

Everything hinges on this test. An employee is entitled to a paid day off on a public holiday only if it falls on a day they would otherwise have worked.

For someone on fixed Monday-to-Friday hours this is obvious. For someone on a rotating working pattern, or with variable hours, or who has recently changed it, it is a judgement based on what has actually been happening — their working pattern, their agreement, and what has genuinely occurred in recent weeks. Get this wrong and you either underpay someone a public holiday or hand out a day nobody was entitled to.

If Someone Works on a Public Holiday

Two things are owed, not one:

That second condition catches people out. A casual who picks up a shift on Boxing Day but would not otherwise have worked gets time and a half, but no alternative holiday.

Closedowns

If you shut down over Christmas, you can operate an annual closedown. The rules are specific:

• You may have one closedown period a year in any given part of the business, and different parts may close at different times.
• You must give employees at least 14 days' notice before the closedown starts, so it cannot be settled in the final week of trading.
• Employees who already have annual holiday entitlement use that entitlement to cover the closedown, in the normal way.
• Employees not yet entitled, generally those under twelve months' service, get 8% of gross earnings less any holiday pay already taken.
• You can set a new anniversary date for employees who are not yet entitled, which changes when their entitlement arises in future.

That last point is the one businesses forget, and it has consequences that run for years.

Practical Things That Could Go Wrong During December Payroll

The Quiet One: Leave Rates

Annual holidays are paid at the greater of ordinary weekly pay and average weekly earnings. In December, more people take leave than at any other point in the year, so any error in how that comparison is calculated is multiplied across your whole workforce at once.

If you only ever check one thing in your payroll configuration, check that both sides of that comparison are actually being calculated, and that gross earnings includes everything it should.

Do It in November

Every problem above is easier to solve in the third week of November than the third week of December. Set the cut-offs, confirm the observed dates for your particular working patterns, check who is and is not entitled, and give notice of any closedown.

Then take the break yourself. That is rather the point.