Holidays Act Remediation Calculator NZ 2026
This calculator estimates what a payroll owes when it worked out annual holiday pay the wrong way, which in New Zealand has been the single most expensive payroll error of the last decade. The rule is short: annual holiday pay is the greater of ordinary weekly pay and average weekly earnings, tested every time leave is taken. Ordinary weekly pay is what someone receives for an ordinary working week. Average weekly earnings is their total gross earnings over the last twelve months divided by fifty-two. Whichever is larger has to be paid. The reason this went wrong so widely is that paying a salaried weekly rate looks obviously correct, and it is, right until the employee earns overtime, commission, a shift allowance or a regular incentive. Those payments lift average weekly earnings above ordinary weekly pay, the greater-of test bites, and a system configured once with a single method never notices. The error is therefore systemic rather than occasional, and it compounds across every week of leave taken over years of employment. You enter the two weekly figures, or let the calculator work ordinary weekly pay out from four weeks of earnings, tell it which method your payroll actually used and how many weeks of leave were taken, and it returns the shortfall per week and the total arrears including the employer on-costs that ride on back pay. Treat it as a scoping estimate: a real remediation is done per employee, per pay period, against actual payroll records.
Average weekly earnings is the higher figure at $1,300 a week, so paying ordinary weekly pay alone underpaid this employee by $100 for every week of leave taken. A scoping estimate only: real remediation is done per employee, per pay period, against payroll records.
How it works
Average weekly earnings is gross earnings for the last twelve months divided by fifty-two, or by the actual weeks employed where that is fewer. Ordinary weekly pay is taken as you enter it. The correct rate is whichever of the two is larger. What was paid depends on the method your payroll used: ordinary weekly pay only, average weekly earnings only, or the greater of the two. The shortfall per week is the correct rate less what was paid, and it is floored at zero, because a payroll that happened to pay the higher figure owes nothing even if it got there by the wrong route. Total arrears multiply the weekly shortfall by the weeks of leave taken and by the number of employees affected. Employer KiwiSaver and the ACC work levy are then added, because back pay is still gross earnings and carries the same on-costs as pay made on time.
Worked example
An employee has an ordinary weekly pay of $1,200 but earned $67,600 in gross earnings over the last twelve months once regular overtime is counted. Average weekly earnings is therefore $67,600 divided by 52, which is $1,300. The greater of the two is $1,300, so that is the rate their annual holiday pay should have used. The payroll used ordinary weekly pay only and paid $1,200, which is $100 short for every week of leave. Across 24 weeks of leave taken over six years that is $2,400 of arrears, and with employer KiwiSaver at 3.5 percent and an ACC work levy of 0.67 percent the total cost of putting it right is about $2,500 for that one employee. Multiply by the number of people on similar arrangements to scope the exposure.
Related calculators
- Annual Leave Liability: the accrued leave sitting on your balance sheet.
- Payroll Error Correction: a single underpayment and its flow-on.
- Annual Leave: the four week entitlement itself.
- Holiday Pay: the employee's side of the same rule.
- Final Pay: where accrued leave is paid out.