Federated Farmers: Know your obligations for holiday pay

With Christmas fast approaching, people will want to take time off to be with loved ones.

Working out when, and how much, to pay employees over this time can be complicated.

With Christmas fast approaching, many employees will look to take time off work to spend with friends and family. Working out when, and how much, to pay employees over this time can be complicated.

It is important to be aware of the public holidays which fall during the Christmas and New Year period. There are four public (or 'statutory') holidays -- Christmas Day, Boxing Day, New Year's Day and January 2. This year, Christmas Day and New Year's Day fall on Thursdays and Boxing Day and January 2 fall on Fridays.

Public holiday pay

An employee's pay on a public holiday depends on whether it is an 'ordinary working day' for the employee. An ordinary working day means how it sounds. A simple test is to ask: 'if the day was not a public holiday, would the employee expect to work?'. For employers that run a roster (such as 12 days on 2 days off), it is simple. Extend your roster out from today until the summer holidays. This will tell you whether any particular day is an ordinary working day or not.

If the public holiday is an ordinary working day for the employee, and they work that day, then the employee will be paid time-and-a-half for the hours actually worked and is entitled to a full day in lieu (or alternative holiday). If the employee does not work, then they are paid for a normal working day and do not receive a day in lieu.

On the other hand, if the day is not an ordinary working day for the employee, but they work that day, then the employee will be paid time-and-a-half for the hours actually worked, but is not entitled to a day in lieu. If the employee does not work then they are paid nothing, nor do they receive a day in lieu.

The day in lieu is an alternative holiday that can be taken at any time, so long as the employer and employee have agreed to it. The day in lieu is paid at the employee's 'relevant daily pay' or 'average daily pay'. If an employee does not take their day in lieu within 12 months, the employee and employer can agree for it to be exchanged for payment.

Relevant daily pay is the amount the employee would otherwise have earned on the day if they had worked. Most of the time, you will use this calculation. Average daily pay is a daily average of the employee's total earnings over the past 52 weeks. That is, the employee's total earnings divided by the number of whole or part days the employee worked, or was on paid leave or holiday, during that period.

The only time an employer may use average daily pay to calculate an employee's pay for working on a public holiday will be when that employee's daily pay varies in the pay period in question and it is 'not possible or practicable' to determine relevant daily pay.

Transferring a public holiday

If the usual public holiday arrangement does not suit the employer or the employee, they can agree in writing to transfer the observance of a public holiday to another working day.

Do not confuse the transferring of a public holiday with a day in lieu as these are different.

After an agreement has been written up, an employee is entitled to a paid day off on the day the public holiday is transferred to. If the employee works on the day the public holiday is transferred to, then they are entitled to be paid time-and-a-half for the hours worked and receive a day in lieu. It is very important that both the employee and employer clearly agree to the arrangement.

Keep in mind that the agreement must not reduce the number of public holidays which an employee is entitled to. For the Christmas period, an employee is entitled to a total of four public holidays.

If you have any further questions about public holidays, or need clarification on any of the information above, feel free to call 0800 FARMING for free, independent employment law advice.