Final Pay Calculations
The calculation of your Final Pay has to take into account a number of variables. We start with some definitions and assumptions before we get to the calculations.
| Entitled Leave | From the start of your employment, most Payrolls accrue leave on a pay-by-pay basis. This 'accrued' leave is done for the benefit of the Employer (accounting for leave liability) and the Employee (so you know how much leave you have available). After 12 months (and on every anniversary of your start date or a Company Anniversary Date) the number of days/weeks/hours accrued moves (rolls over) to Entitled Leave and the accruals start again from zero. |
| Accrued Leave | This is the leave that 'accrues' within your current holiday pay year. As per the above, it is done solely for the benefit of Employers and Employees and is NOT defined in the Holidays Act. |
| Current Holiday Pay Year, Anniversary Date | This is a rolling period based originally on your Start Date and rolls over each year on your Anniversary (some companies run a Company Anniversary Date whereby all staff 'roll over' on the same date each year, normally around December). |
| Advanced Leave | This is leave taken from your Accrued balance if allowed by the Employer. An employer is not required to approve the payment of Advanced Leave. It is paid on the same calculation basis as Entitled Leave. You cannot have an Entitled Leave balance and an Advanced Leave balance as an Advanced balance can only exist when there is no Entitled Leave. |
| Public Holidays in the future may be included in the Termination Pay | Entitled Annual Leave is extended past the last working day and if a Public Holiday falls within this period, then it must be added to the Termination Pay. For example, if you have 7 days of Entitled Leave and there is a Public Holiday 3 days after your last working day, then you are entitled to be paid the Public Holiday(s). |
| Alternative Leave must be paid out on Termination | If you have an Alternative Leave balance then these must be paid out. These would normally be paid based on the hours worked on your last day of employment - your Relevant Daily Pay. Alternative Leave does not extend Entitled Leave balances. |
| Long Service Leave may be payable on Termination | This will depend on the clause within your Employment Contract. |
| Sick Leave is not paid out on Termination | This is the usual situation but refer to your Employment Contract for any variation. |
| Redundancy Payments | Redundancy Payments are not included in Annual Leave rates as not considered ‘Earnings'. |
| Lieu of Notice Payments are deemed 'Earnings' | These would be taken into account in the Final Pay calculation. |
| Termination whilst on Parental Leave | When an employee terminates whilst on Parental Leave we must set the termination date to the date they went onto Parental Leave. This has the effect of unwinding any Leave Accruals while on Parental Leave. |
| Holiday Pay | Holiday Pay and Annual Leave are the same in respect to this post. |
| Payment of Termination Pay | Unless stated within an Employment Contract, the final pay must be made within the next normal pay cycle. |
Leave calculation during Employment
The calculation of your Leave during your working life (regardless if it's Entitled or Accrued Leave) is as follows:
'The greater of your Ordinary Weekly Pay (OWP) compared to your Average Weekly Earnings (AWE), also referred to as your 52 Week Average. If you are unable to determine your Ordinary Weekly Pay, then you must use a 4 Week Average, compare it to AWE, and pay the higher of the two.'
Leave calculation on Termination
Unlike the above calculation, Termination Pay is quite different and has a number of other steps.
- All Entitled Leave is paid at a rate similar to the above calculation (greater of OWP and AWE), plus an additional 8% on top.
- All Accrued hours/days/weeks units are ignored on Termination and the $ calculation is 8% on all Gross Earnings during your Current Holiday Pay Year (since your Entitlement Date) LESS the $ value of any Advanced Annual Leave.
- Plus, 8% of Gross on all other items paid in your final pay, that are liable for Holiday Pay. This will include your final hours, any public holidays payable, any alternative leave, hours in lieu payments etc.
The Final Pay Report
Below is a sample of the Final Pay Report.
Current Pay - All worked payments in your final week, fortnight, or month.
Alternative Leave - This employee had one day of Alternative Leave
Annual Leave Entitled - This employee had 13.87 days of Entitled Leave
Annual Leave Accrued - Gross Earnings from your last Anniversary Date x 8% (if the Employee had taken Leave in Advance then from this figure we would deduct the gross value of the leave taken - not shown in this example as the employee has Entitled Leave)
Annual Leave Accrual Final Pay - This is an 8% calculation on all Current Pay items (and any entitled leave items) that are deemed 'Earnings', plus 8% on the gross value of Entitled Leave.
Annual Leave Owing Calculations
This section shows the figures used to generate your Final Pay, for reference only.