Parental leave and annual leave: how it’s calculated
There’s been some recent publicity about some new mums, who’ve taken parental leave, being surprised that their employer has paid their subsequent annual leave at a lesser rate, rather than at what was their full salary.
The Parental Leave and Employment Protection Act 1987 allows parental leave to the employed and self-employed.
When it comes to taking a holiday, however, an annual leave entitlement over your parental leave period switches to come under the Holidays Act 2003.
Let’s focus on paid maternity leave first: Paid maternity leave is available for up to 14 weeks, up to a maximum of $458.82 per week before tax. It’s paid by the IRD. If your gross weekly pay, when working, was less than $458.82 then you will be paid at the lower rate.
Depending on your circumstances, there is provision for further unpaid leave whilst you’re on maternity leave. Even though you’re not working during your parental leave, you continue to accrue annual leave. If you have an annual leave entitlement you may choose to take your holidays before starting your maternity leave. This means you will be paid for that holiday, under the Holidays Act provisions, at the rate of:
»» Ordinary weekly pay at the beginning of your holiday, or your
»» Average weekly earnings for the 12 months prior to your holiday whichever is the higher.
If you’ve worked overtime during the 12 months before you took maternity leave, this may make your average weekly earnings higher. Likewise if you’re coming back from a period of extended leave and would normally have had regular overtime, you may not want to take any annual leave until you’ve worked another 12 months to ensure you’re being paid at a higher rate during your holiday.
And just so you know: when you’re returning to work from parental leave, that parental leave period counts as part of your continuous employment.
Our comments above relate to the minimum provisions in the Act, individual employment contracts may be more generous.
The Department of Labour’s website, www.dol.govt.nz, provides a comprehensive guide to parental leave, including a paid parental leave calculator and standard forms. It’s a most valuable resource for employers, employees and the self-employed.
Casual employees: the law clarified
Two recent Employment Court cases2 have clarified the law on casual employees. Generally, a casual employee is one who has no expectation of on-going employment and their employment terminates at the end of each engagement.
These recent decisions have held the following:
»» The strongest indicator of whether someone is not a casual employee, that is, a permanent employee, is by assessing whether you need to offer your employee available work and whether your employee is required to do that work.
»»While employment can start out as casual, it can change to permanent employment over time.
»» Despite the parties having signed a ‘casual employment agreement’, the court can consider the ‘real nature of the relationship’.
»» If the employment agreement has any obligations which apply after each engagement, for example if your employee needs to give notice to take leave or to resign, or is restrained from working from other employers, then this will indicate there is a permanent employment relationship.
These developments are of importance if you hire casual employees. If you incorrectly hire employees as casual employees, you could be liable – following a personal grievance claim by your employee – to pay them compensation and/or additional holiday pay.
2 Jinkinson v Oceana Gold (NZ) Ltd (2009) 9 NZELC 93,341; [2009] ERNZ 225; (2009) 6 NZELR 813 (EMC); Rush Security Services Ltd t/a Darien Rush Security v Samoa[2011] NZEmpC 76
