If you have a regular annual closedown period where your employees are required to stop working and take their annual leave, the setup of a new permanent employee is different to usual. Follow this article to get this right.
Updated: September 2023
An employer may have a customary closedown once a year requiring employees to stop working and take their annual leave during this period as long as they give their employees 14 days' notice.
If you are setting up a new employee, chances are that the closedown will occur before they reach their 12-month annual leave entitlement date.
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If the annual closedown falls before the employee's 12-month annual leave allocation date, you MUST do the following:
- pay out their 8% of gross earnings since the start of employment, and
- move their annual leave anniversary date to the start of the closedown, or to a date chosen by the employer near the closedown period.
For this to occur correctly in the Thankyou Payroll system, you have to set their leave setting up as specified in this article. Let's go through the steps:
Initial Employee Setup
When you first set a new employee up in the system, you will have to set them up with the leave setting: ' 8% of gross earnings (temp and irregular scenario)' - Accumulate and paid later. This is so that the 8% of gross earnings you MUST pay out at the annual closedown will be calculated correctly.
- In the 'Leave' tab of the Employee Profile, set the leave setting to '8% of gross earnings (temp and irregular scenario)'.
- Select the 'accumulate and pay later' setting so this will be paid out at the start of the annual closedown.
- You will note that the Sick Leave allocation date will be their start date.
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If your employee requests leave in advance during this first year while they are on the '8% of gross' leave setting, pay this out as holiday pay. Here is an article showing you how to do this.
At the time of the Closedown
Step 1: Pay out 8% of Gross Earnings
Pay out their total amount of Holiday Pay, minus any leave in advance already taken. Here is an article to show you how to do this.
Step 2: Updating Employee Settings
There are three important changes that you need to make at this time so that your employee will start to accrue leave as usual:
- In the 'Leave' tab of the Employee Profile, change the leave setting to 'rate set as per the Holidays Act'. Make sure that all the weeks of leave, typical days and hours are correct.
- Set the 'same as default standard week' setting if you have completed the 'set default entries for standard pay row of timesheet' in the Standard Pay tab.
- Change their leave anniversary date to the start date of the annual closedown, or the date chosen by the employer.
- Change their 'date of most recent leave anniversary' to the start date of the closedown, or the date chosen by the employer.
- You will notice that the sick leave anniversary date will be their start date, which should remain the same. Do not change this date.
If you are at all unsure about updating the employee's settings or if you have any questions, contact our Customer Success Team. We are here to help and will check that everything has been updated as needed in the system.
That is it! You have successfully updated your permanent employee's annual leave settings as affected by the annual closedown.
Follow this link for more information on annual closedowns from Employment New Zealand.
*Follow this link to access an Annual closedown flowchart.