Holiday Pay Survival Guide: What Every NZ Small Business Needs to Know

The Christmas and New Year break brings cheer, but for small business owners, it also brings complex payroll rules. If your team is working those statutory holidays - Christmas Day, Boxing Day, New Year’s Day and the day after, you need to make sure you pay them correctly. Get it wrong, and you risk a compliance headache.

Guide to navigating public holiday pay for your staff.

The Most Important Question: Do They Usually Work That Day?

The single most important rule is determining if the public holiday is an “Otherwise Working Day” (OWD) for that individual employee. This means: Would they have worked that specific day if it hadn't been a public holiday?

If the answer is Yes, they get the full, mandatory entitlements.

They may get an alternative holiday (day in lieu) when they work on a public holiday. If they are on call on the public holiday, whether they get an alternative holiday depends on their call-out arrangement.

If a staff member works on a day that is an OWD for them, you have a dual obligation of Premium Pay: You must pay them at least “Time and a Half” (T+1/2) for every hour they work. A Day in Lieu: They must be granted one full, paid day off later, known as an Alternative Holiday (AH). This is a future liability you must track.

If the day is not an OWD (for example, a staff member who never works Fridays works on Christmas Day which falls on a Friday), you only pay the Premium Pay (T+1/2); they do not accrue an Alternative Holiday.

Watch Out for the Pay Calculation Trap!

Here is the biggest risk area for small businesses: the "Time and a Half" calculation isn't always as simple as multiplying their base wage by 1.5.

The law says you must pay the greater of Time and a Half or their "Relevant Daily Pay (RDP) plus any penal rates" . What does that mean?

If your employee earns commission, bonuses or other variable payments, their RDP might be higher than their basic hourly rate. If they are highly productive during the Christmas rush, their pay for the public holiday must reflect those usual earnings, or you risk underpaying them. Never default to just the base hourly rate if they are high earners!

What About Staff Who Don’t Work?

If the public holiday is an OWD for an employee, and they are not required to work, you must still pay them for that day using their regular pay calculation . You can't just mark it as a normal day off without pay.

Action Plan for Small Business Owners

To keep things compliant and simple this season:

• Determine OWDs: For staff with variable rosters (like casuals), have a clear, consistent way to determine their OWD status. A common rule-of-thumb is that if they have worked that day 50% or more over the last 13 weeks, it's an OWD.
• Track Days in Lieu (AH): Immediately record the Day in Lieu liability for anyone working an OWD. This is a debt owed to your employee, and you need to ensure they take it later.
• Keep Records for Six Years: The law requires you to keep detailed records of all public holiday calculations, including the inputs used for their pay, for a minimum of six years.

The Summer break should be relaxing, not a source of payroll stress. By focusing on the OWD status and double-checking your pay calculations, you can ensure a smooth and compliant holiday period!