Ace Payroll: Holidays Act Section 21 Proportionate holiday pay in respect of employment for less than one year




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Guide to Holidays Act 1981

Note: This is the text of the old Act that remains in force until 31st March 2004. From 1st April 2004 leave is governed by the Holidays Act 2003

Section 21 Proportionate holiday pay in respect of employment for less than one year

In Plain English

This section specifies the calculation of termination payments for all employees.
If an employee has been employed for less than a year, they are entitled to holiday pay calculated as 6% of their gross earnings.
If they have been employed for more than a year, they are entitled to payments for any unused holiday days accumulated in their full years of service, plus 6% of the gross earnings for that last period of their employment that is not a full year.
Some interpretations believe that section 21.3 requires an employer to also include holiday pay on any payments received by the employee from ACC.
An employer can deduct from the final payment any holiday pay that may have been paid in advance.

Legislation

21.1 This section applies with respect to every period of employment of a worker by any employer which is less than one year, computed from the date of the commencement of the employment or (where the worker has during the employment become entitled to any annual holiday or holidays) from the date on which he became entitled to that annual holiday or to the last annual holiday, as the case may be.

21.2 Except as otherwise provided in this Act, where the employment of a worker by an employer is terminated at the end of a period of employment to which this section applies, the employer shall forthwith pay to the worker, in addition to all other amounts due to him, an amount equal to 6 percent of his gross earnings during that period.

21.3 Where during the employment of any worker to whom subsection (2) of this section applies he is unable to work because of sickness or injury, then, for the purposes of that subsection the term "gross earnings", in relation to that worker, includes in respect of each complete week of absence through that sickness or injury an amount equal to the amount of ordinary pay that he would have received had he not been absent, reduced by the amount of any sick pay received by him in respect of that week or any part of that week.

21.4 Where the employment of a worker is terminated at the end of a period of employment to which this section applies, being a period that is less than 3 weeks, subsection (2) of this section shall not apply but instead, except as otherwise provided in this Act, the employer shall forthwith pay to the worker, in addition to all other amounts due to him, an amount equal to 6 percent of the total ordinary pay for the time worked by him during that period.

21.5 The employer may deduct from any amount payable to a worker under subsection (2) or subsection (4) of this section, all amounts already paid to the worker in accordance with section 17 of this Act in respect of any annual holiday to which the worker has not become entitled at the date of termination of his employment.

Cf. 1944, No. 5, s. 4; 1974, No. 149, s. 4