Calculating pay for other leave…

Payment for public holidays, alternative holidays, sick leave and bereavement leave can either be done on a relevant daily pay rate or an average daily pay rate.  A dispute arose between employees and their employer over whether the employer could choose which rate to pay.  In their case there was a large difference between the two rates because the employees were paid partly on base salary and partly on commissions and the commissions were paid irregularly.

The matter was heard by a full Court of the Employment Court because it has wider ramifications than just the employer and employees in this case.  The Court found that if the relevant daily pay cannot be calculated, an employer must use the average daily pay calculation, but if the RDP can be calculated (even though the pay varies in the pay period) the employer has a choice of using either RDP or ADP.

The employer had chosen to use relevant daily pay because that gave a much lower calculation for leave payments than an average daily pay, which would have included the commissions paid.

The decision will have ramifications for people paid commissions or other irregular payments over and above the base salary, but each case must be decided on its own facts and that would depend on whether the relevant daily pay can be calculated or not.  If it can’t be, then the ADP must be used.

Alan Knowsley

Employment Lawyer Wellington