Annual Leave Payouts (NZ)

Summary

In New Zealand, employees receive 4 weeks of statutory annual leave. From 01/04/2011, when the employee's annual leave table rolls over, they can request up to 1 week of statutory annual leave as a cash payout, instead of taking the leave.

Important: Employees can request a payout only after their annual leave table rolls over on or after 01/04/2011.

If an employer decides to offer the payout option, then they can inform employees that it is available, but they cannot initiate the payout process. The employee initiates a payout by submitting a written request to their employer who can approve or decline payouts on a case-by-case basis without providing reasons.

Employees can be paid out for entitled leave only, not accrued leave or leave in advance. Employees can be paid out a maximum of 1 week’s entitlement in an annual leave year, including multiple increments of hours or days (with the total not exceeding 1 week’s entitlement).

Payouts are made at the employee's normal annual leave rate. The gross earnings used to calculate the employee's normal annual leave rate excludes any annual leave payout values. However, the gross earnings used to calculate superannuation includes any annual leave payout values. Payouts are taxed as "Extra Pay" and they are not included in leave accruals.

Non-statutory Annual Leave

Some employers provide extra annual leave entitlement and allow employees to be paid out for this non-statutory portion of their annual leave. The legislative changes from 01/04/2011 do not affect non-statutory annual leave. However, you can create an annual leave payout allowance to record non-statutory payouts.

Annual Leave Payout Allowance - Statutory

You need to add a new Allowance record for annual leave statutory payouts.

Important: Do not model an existing annual leave allowance because you will not be able to edit the AL payout type field.

In the Allowances grid, add an annual leave payout allowance with the following values:


Field	Data
Details (i) tab
Type	L. Annual Leave
Calculation method	Q. Quantity
Tax override	Yes
Note: When you select Tax override = "Yes", the disabled Taxable field changes to "Yes".
Tax override type	E. Extra Pay
Details (ii) tab
Ordinary		Yes - Paid out leave is displayed in the Ordinary time payout and Ordinary time hours fields in the Grand Totals section of the PGPRMISC004 - Statistics Report.
Details (iii) tab
Allow proportional costing		No
AL payout type		Statutory
Include in Annual Leave		No - Statutory payouts do not usually contribute to gross earnings for leave rate calculations, but employee contracts may specify otherwise
Include in statistics report		Yes
Include in Super calculations		Yes
Include in FTE calculations		Yes
Groups tab
After you save the record, add the new allowance to KiwiSaver and superannuation allowance groups.

Annual Leave Payout Allowance - Non-statutory

If you provide employees with extra (non-statutory) leave and they can request payouts from their extra leave, then you need to add a new Allowance record for annual leave non-statutory payouts.

Important: Do not model an existing annual leave allowance because you will not be able to edit the AL payout type field.

In the Allowances grid, add an annual leave payout allowance with the same values as the statutory allowance, but:

AL payout type = Non-statutory
Include in Annual Leave = Yes (unless employee contracts specify otherwise).