Questions and Solutions for FiveStar Payroll Pro
A new law a couple of years ago required holiday pay paid in a pay period which includes the next few pay periods to be taxed at a flat rate, much like a
one-off bonus. For example, 3 weeks at Christmas/New Year. Payroll Pro will default to this flat rate calculation.
However, the rules have been relaxed a bit, and it is now ok again to apportion the holiday pay over the number of future weeks it covers. Yes, it is confusing having this change back and forth like this.
In Payroll Pro version 2, you can simply enter the number of weeks covered by overriding the figures.
1. Click in the area shown below.
2. Enter the number of weeks in the box, and click Yes.
3. You will now see the following, with PAYE calculations etc spread out over the number of weeks you entered:
This will automatically revert to normal for your next pay.
In Payroll Pro version 1
We suggest a manual override of the tax calculation.
1. Click the PAYE button
2. Click "Override" and enter your manually calculated figure. Click OK.
3. You will see the override:
4. Next pay - remember to go through the above process and remove the override.
In Payroll Pro version 2, there is an additional option so that you do not need to remember to remove an overridden tax calculation.
Sick leave, bereavement leave, public holidays and alternative holidays (lieu days) are all calculated in the same way - the amount the employee would have earned had they worked on that day. If it cannot be determined (eg a very irregular work pattern), then the average daily pay is used. In the following, "Sick leave, bereavement leave, public holidays and alternative holidays" will be shortened to SBPA.
Annual holidays (holiday pay) on the other hand is calculated as the greater of the current ordinary weekly rate and the average weekly rate for the past 52 weeks.
This means it is possible for the SBPA rate to be different to the holiday pay rates.
Under the Holidays Act, for SBPA it is the amount the employee would be paid had they worked on that day. If an employee has irregular days and/or hours, then the average daily rate over the past 52 weeks is used.
However, for holiday pay, the average weekly rate has to be used, and then compared with the ordinary weekly rate and the higher figure used.
This means that for SBPA, only days paid for (worked or leave) are included in the divisor, whereas with holiday pay 52 weeks is always used.
Employee earns $80,000 over past 52 weeks.
Average weekly pay is $80,000 / 52 = $1538.46
And average daily pay for holiday pay is $1538.46 / 5 = $307.69 (for an employee who has 20 days annual leave per year).
The same employee could have worked and taken 260 days in the past 52 weeks, and in this case, the SBPA value would work out the same:
$80,000 / 260 = $307.69 per day
But if the $80,000 was for fewer days, say 250, then this would be:
$80,000 / 250 = $320.00 per day
If the $80,000 was for more days, say 280, then this would be:
$80,000 / 280 = $285.71 per day.
But in all these cases, the past 52 weeks is still the same $80,000/52 = $1538.46, divided by 5 = $307.69.
When an ordinary week for holiday pay cannot be determined, the past 4 weeks are averaged (as per Holidays Act), and this is used in place of the ordinary week. Then this figure is compared with the past 52 weeks, and the higher figure used.
This can (correctly) lead to even more differences between annual leave and SBPA values.
Special Note: When an employee becomes entitled to additional holidays while on parental leave (ie they pass a holiday anniversary date while away), they are given the additional 4 weeks, because they are still employed.
The employer can however, pay this at the lower rate (lower of current ordinary and last 52 weeks average) for the first 12 months after returning, should the employee take a holiday during this time.
Of course, after 12 months the usual rules apply again, so if the employee does not get any holidays over that 12 month period, there is no effect. It is only those taken within the 12 months that the lower rate applies to.