Question:

 

I was wondering whether you could clarify for me whether certain bonus’s should be included in the annual average hourly rate for leave payments or not.

We pay annual bonus’s that are KPI based or performance based, and depending on the years achievements by the employee a bonus is paid. This is written into contracts for those that are involved in these bonus schemes.

My thoughts would be that as they are performance based, they should be included in the annual average hourly rate calculation, even though they are paid annually.

Our HR Manager in New Zealand believes they should not be included, because being paid annually, they are not \”regular\”.

Can you please clarify either way, or let me know if you need more information.

Answer:

 

Do the clauses in the employment agreement clearly state that these types of bonuses are discretionary in nature?
 
Sections 14(b)(i) and 8(1)(c) of the act state if it is a discretionary payment it can be excluded from the annual leave calculation.
 
An annual bonus is a regular payment if written into an employment agreement (unless stated as discretionary), you have created an expectation that it will be paid as long as KPI’s are met.  The history of the payment over time also will show if it is a regular payment.  A regular payment could mean the amount could vary but it is based on how often it is paid.  Records of this type of payment are kept for 7 years and the court could see how often over time it had been paid to the employee.
 
Unless you have clearly stated these payments are discretionary in nature I do believe annual bonuses should be excluded in this calculation.