Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Employee returns from parental leave and then terminates

In the Holidays Act 2003 section 16, parental leave is counted as continuous employment; this means any staff on parental leave under this act will be accruing annual leave entitlement. This section excludes the use of ordinary weekly pay, so the calculation for holiday pay is based on average weekly earnings over a 12-month period.

Section 42.

Employer's obligations with respect to

remuneration and holiday pay

(1) Subject to subsections (2) and (3) of this section, the employer of an employee who takes any form of parental leave in accordance with this Act shall not be obliged to pay that employee any remuneration for — (a) any period of the employee's parental leave under this Act; or (b) any period during which the employee is entitled under this Act, following any period of parental leave, to preference in obtaining employment with the employer. (2) If an employee becomes entitled to an annual holiday on pay during — (c) the period of 12 months commencing with the date on which the employee returns to work after a period of parental leave under this Act or a period of preference in obtaining employment — the employee is, despite anything in section 21 of the Holidays Act 2003, entitled to holiday pay for that holiday only at the rate of the employee's average weekly earnings (as defined in section 5(1) of the Holidays Act 2003) for the 12 months immediately before the end of the last pay period before the annual holiday is taken or paid out. What happens when an employee returns to work from parental leave and terminates? 1. Any annual leave entitlement that the employee had earned prior to going on parental leave is calculated under the rules of the Holidays Act (Section 25 greater of AWE and OWP). 2. Any annual leave entitlement earned while on parental leave or in the 12 months on return from parental can only use AWE (based on a gross going back from the last pay period 12 months). (a) a period of parental leave under this Act; or (b) a period of preference in obtaining employment; or

© New Zealand Payroll Practitioners Association, Mar 2026, Ver 9

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