How do I calculate my employee's income for the application form?

If your employee is eligible for statutory parental leave, they are also entitled to a government funded parental leave payment administered by Inland Revenue [external link].
The payment will be equivalent to the lesser of either:

• The employee’s ordinary weekly pay or average weekly earnings, or
• $441.62 per week before tax.

When your employee applies to Inland Revenue [external link], you are required to verify the employee’s ordinary weekly pay or average weekly earnings over the appropriate six or 12 month period. This depends on whether the employee has qualified for paid parental leave over six or 12 months in your employment. You may have a payroll system that is configured to calculate this for you.

If you are required to do the calculation and verify the employee’s application, the following approaches can be taken:

Ordinary Weekly Pay

To calculate ordinary weekly pay, enter the employee’s gross wage for a normal week, calculated on their normal hours of work and their ordinary pay rate:

• If your employee’s ordinary weekly pay is more than $441.62 per week, no calculation is required. Just enter their ordinary weekly pay over the qualifying six or 12 month period and they will receive the maximum parental leave payment, currently $441.62 per week before tax.
• If your employee earns the same amount each week but less than $441.62, no calculation is required.  Simply record their ordinary weekly pay over the qualifying six or 12 month period, and that is the payment they will receive before tax.

Or

Average Weekly Earnings
If it is unclear whether the employee’s average wage is more or less than $441.62 per week before tax, for example, if their pay varies from week to week without a regular pattern a calculation is required to establish their average weekly earnings:

1. Record the pattern and level of wages earned from the relevant qualifying date (either six or 12 months) before the expected date of birth or adoption to the last pay period prior to completing the calculation.
2. Extend the pay pattern as if it had continued until the expected date of delivery or adoption, including any additional payments your employee could have expected to receive, such as commission, bonuses, parental leave payments you may make or annual leave. This figure is the employee’s gross earnings.
3. Divide this amount by either 26 or 52 – the number of qualifying weeks covered by the calculation to identify their average weekly earnings.

However, where any of the following circumstances apply:

• Your employee has been absent on leave with pay
• Your employee has taken leave of any kind without pay with your agreement
• Your employee has been absent from work and receiving ACC compensation payments
• Your employee has been on maternity leave before the expected delivery
• Your employee has had leave for service with the voluntary military service
• Your employee has been absent for a reason that a Labour Inspector considers does not disrupt the normal pattern of work (for example, a regular closedown of the workplace during which time your employee was unpaid) the number of weeks you divide the gross earnings by needs to be reduced by the complete number of weeks taken in any of these circumstances. Do not include part weeks in the calculation.

What earnings are included in gross earnings?

Gross earnings, as defined in the Holidays Act 2003, includes:  salary; wages; allowances; payment for holidays, sick or bereavement leave; commission; overtime; the cash value of any board or lodgings; and the first week compensation payable by the employer under the Injury Prevention, Rehabilitation, and Compensation Act 2001.

This calculation does not include any discretionary payments, weekly ACC compensation, reimbursements or payment for service with the Territorial Army.

EXAMPLE

An employee has earned $15,000 gross during the 12 month qualifying period, but has taken four weeks unpaid leave. The employee plans to commence parental leave six weeks before the expected birth of their baby.

Reduce the 52 weeks by four for their unpaid leave, then by six for the period of leave before the due date, to obtain a total of 42 weeks. Then divide the $15,000 gross earnings by 42, resulting in an average weekly earnings figure of $357.14. This is the figure you confirm to Inland Revenue [external link] and will be the level of your employee’s parental leave payment.

If you experience difficulties when completing the calculation or there are differences between yourself and your employee about the calculation, see our fact sheet on problem solving and help. The Department of Labour can also put you in contact with a Labour Inspector, who can determine the amount on behalf or you and your employee.

This page was last updated on: 29-Jun-2010 and is current.