Q: I am reaching out regarding an article you made in August 2018 regarding backpay and the Holidays Act – https://www.linkedin.com/pulse/backpay-holidays-act-getting-right-david-jenkins/

My query is regarding if the article still applies to payroll today in terms of back paying annual leave.

From my understanding I would pay the difference from the old rate to the new rate for the period agreed to be paid (this is for hours worked) and then also pay the difference from the old rate to the new rate for any leave that was taken during this period at the new rate as well.

My confusion here lies with the rate at which annual leave needs to be back paid. For annual leave we pay the higher of OWP (4-week average)/AWE.

Any clarity on this matter would be truly appreciated. I have called our payroll provider (Smartly) and Employment NZ but both have not been able to give me a helpful answer.

A: Yes, this article is still correct.

Annual holiday entitlement is calculated at the greater of OWP and AWE.  Is the employee a variable hour’s employee to use the 4-week average for OWP?  If not then OWP is based on the agreed week not the 4 weeks average.

If backpay annual leave is paid it must be taxed as an extra pay.