Public Holidays - to Pay or not to Pay Pt2

Part 2/2 – In this section we are going to look at payments, alternative holidays and transferring of public holidays. This will naturally follow after we have established that an employee is entitled to a public holiday, as discussed in Part 1/2.

What to pay

• If an employee does not work on a public holiday, but the day would otherwise have been a working day for the employee, the employee is entitled to not less than his/her relevant or average daily pay for that day.

  Example: The employee works Tuesdays and Tuesday is a public holiday – the employee does not work on that specific Tuesday, but will still receive his/her normal pay as if he/she has worked.

• If an employee works on any part of a public holiday, and the day would otherwise have been a working day for the employee, the employee is entitled to 1.5 x their normal rate for each hour worked, AND an alternative holiday*.

  Example: The employee normally works on Mondays and Monday is a public holiday and the employee is requested to work. The employee will receive 1.5 x for every hour worked on the public holiday as well as an alternative holiday.

  *What is an alternative holiday? If an employee has had to work on a public holiday, an alternative holiday gives them a day off at another time with their normal daily rate being paid out to them. In effect, the “public holiday” is just taken at another time. If not taken this alternative holiday can be paid out upon request or on termination, but it can never expire.   

  If the employee is working on the public holiday, they should be paid on the basis of relevant daily pay (rather than average daily pay). This is because:

• employers will always be able to work out relevant daily pay when the employee actually works on the public holiday;
• employees generally expect to be paid relevant daily pay;
• using relevant daily pay, where this can be calculated, will always comply with the Holidays Act 2003.

Calculating relevant daily pay

Relevant daily pay (RDP) means paying an employee what they would have earned if they were at work on the day.

Relevant daily pay includes:

• payments such as regular, taxable allowances, commission and bonuses if the employee would have received them on the relevant day;
• overtime payments, if the employee would have received them on the relevant day;
• the cash value of board or lodgings if this has been provided by the employer.

 Relevant daily pay excludes:

 employer contribution payments into an employee superannuation fund;

• reimbursements payable to the worker for the day.

 Example: Ben works Monday to Friday, 8:00 to 17:00 with an hour meal break. He receives $1,800.00 gross, fortnightly. He worked 4 hours on the last public holiday, therefore he will receive 1.5 x his relevant hourly pay for each hour worked as well as an alternative holiday.

His relevant daily pay will be calculated as follows;

• $1,800.00 ÷ 10 (5 days a week, but payment is fortnightly, therefore 10 working days)
• = $180.00 per day ÷ 8 hours per day (08:00 to 17:00 with an hour unpaid lunch break)
• = $22.50 per hour
• ($22.50 x 4 (4 hours worked on the public holiday)) + ($11.25 (half the normal rate for 1.5 calculation) x 4) = $135.00 – what Ben would receive for his hours worked on the public holiday.

Penal rates

Employment agreements can have a special RDP rate, called a penal rate, for calculating payment for public holidays. This is an additional amount that the employer and employee agree will be paid to the employee for working on a public holiday, this might be an hourly rate and be stipulated as, for example, $20.00 per hour.

If you have a penal rate in the agreement, you will have to do two calculations before paying an employee for attending work on a public holiday.

1. RDP at 1.5, as explained above; and
2. RDP + penal rate.

If we use the RDP as explained above, the hourly rate would be $22.50 and if we use the details above regarding the penal rate, we will have to add another $20.00 to this, therefore, the hourly rate would be $42.50 x 4 (worked on the public holiday) = $170.00.  

In this case, the amount including the penal rate is higher than the 1.5 rate, therefore, the employee will be entitled to the higher amount. Please note, this amount is only due for actual time worked on a public holiday, the alternative holiday will be calculated and paid at RDP rates only.

• One last calculation……

Calculating average daily pay

Average daily pay (ADP) may only be used if:

• It is not possible or practicable to work out relevant daily pay, or
• an employee's daily pay varies in the pay period in question.

Average daily pay is a daily average of the employee’s gross earnings over the past 52 weeks. This is worked out by:

• adding up the employee’s gross earnings for the period, and
• dividing this by the number of whole or part days the employee either worked or was on paid leave or holidays during that period.

Example: Using the same scenario of Ben as above. According to payroll, his gross earnings for the past 52 calendar weeks were $55,000.00. There were 260 workings days during this period (5 days a week x 52 weeks) and off these 260 days, he was on paid sick leave and paid holidays, these days are included in the 260 days – only days which the employee did not work or got paid for (unpaid leave) are excluded from the 260 days.

His average daily pay will be calculated as follows;

• $55,000.00 ÷ 260 = $211.54 per day
• $211.54 ÷ 8 = $26.44 per hour
• ($26.44 x 4 (4 hours worked on the public holiday)) + ($13.22 (half the normal rate for 1.5 calculation) x 4) = $158.64 – what Ben would receive for his hours worked on the public holiday