An employee’s annual leave entitlement accrues while they are away on parental leave as the leave is considered to be part of the employee’s continuous service. However, a little known fact amongst employers is that the method of calculating holiday pay for employees who have returned from parental leave is different to the normal holiday pay calculation.
Holiday pay is normally calculated as the higher of wither the average weekly earnings for the last 12 months immediately before the end of the last pay period before the holiday is taken, or the employee’s ordinary weekly pay at the beginning of the holiday. However the calculation changes when the employee takes holidays in the 12 months following parental leave.
The calculation for holidays taken within 12 months of return from parental leave is based on the average weekly earnings for the 12 months immediately before the end of the last pay period before the holiday, and is not compared to the ordinary weekly pay. This means that it is very likely that the amount of holiday pay maybe less then the employee is expecting.
It is important that both employers and employees are aware of the difference in calculation methods before annual leave is taken.
If you have any questions about the above or for more information please contact us.