What Does “Including Public Holidays” Mean In NZ Employment Agreements?

If you employ staff in New Zealand, you’ve probably seen (or used) the phrase “salary includes public holidays” or “pay is inclusive of public holidays” in an employment agreement.

It sounds straightforward, but in practice it’s one of those clauses that can create confusion, payroll headaches, and avoidable disputes - especially for small businesses where you’re juggling rosters, busy periods, and tight cashflow.

This article explains what “including public holidays” means in an employment agreement in plain English, from an employer’s perspective: what you can and can’t do, what the law expects, and how to word and apply these arrangements properly.

What Does “Including Public Holidays” Actually Mean?

When an employment agreement says pay is “including public holidays”, it’s usually trying to communicate one of these ideas:

• The employee’s salary is intended to cover their ordinary paid entitlements (including being paid for public holidays that fall on days they would otherwise work).
• The employee won’t see a separate “public holiday payment” line item when a public holiday occurs (because the employer pays a fixed salary each pay period).
• The employee is on an annual salary, and the employer pays the same amount each pay period regardless of how public holidays fall in that period.

In other words, it’s often used as shorthand for: “We’re paying you a fixed annual salary and you’ll still receive your public holiday entitlements, but your base pay doesn’t change just because a public holiday falls within the pay period.”

But here’s the key point: you generally can’t contract out of minimum public holiday entitlements. Even if you write “including public holidays” into the agreement, you still have to provide the minimum entitlements required by law.

So the real question is not whether you can use a salary arrangement that’s described as “including public holidays” (you often can structure remuneration that way), but whether your approach:

• still delivers the employee’s minimum entitlements, and
• is clear, accurate, and administered correctly in payroll and rostering.

What Does NZ Law Require For Public Holidays?

Public holiday entitlements in New Zealand are mainly governed by the Holidays Act 2003. You don’t need to memorise the Act, but you do need to know what outcomes you must deliver as an employer.

If The Public Holiday Is a Normal Working Day

If the public holiday falls on a day the employee would normally work (an “otherwise working day”), then generally they’re entitled to:

• a paid day off (paid at their “relevant daily pay” or “average daily pay”, depending on the circumstances), if they don’t work; or
• time and a half for hours actually worked, if they do work; and
• an alternative holiday (a paid day off in lieu), if they work.

This is where many “including public holidays” misunderstandings happen. Even if your employee is salaried and paid the same each week, if they work on a public holiday that is an otherwise normal working day, they still need to receive at least time-and-a-half for the hours worked and an alternative holiday. “Inclusive” wording doesn’t remove that obligation.

If The Public Holiday Is Not a Normal Working Day

If the public holiday falls on a day the employee wouldn’t normally work, then typically:

• you don’t have to pay the employee for not working that day (because it’s not an “otherwise working day”); and
• if the employee does work, they’re generally entitled to time and a half for hours worked, but they won’t usually be entitled to an alternative holiday (because the day wasn’t otherwise a working day for them).

So for employees with irregular rosters, the “otherwise working day” analysis becomes very important, and your agreement and record-keeping need to align with how the role actually works in practice.

You Can’t Contract Out Of Minimum Entitlements

As a small business employer, it’s tempting to include short clauses that “simplify” pay and entitlements. But minimum employment entitlements are not optional.

Even if an employee agrees in writing, if the effect is that they receive less than the minimum entitlements, that clause may be unenforceable and you could still be liable for arrears.

If you’re setting up (or updating) your agreements, it’s usually worth getting the fundamentals right in your Employment Contract so the wording matches how you actually run your payroll and rosters.

When Can You Say Salary “Includes Public Holidays” (And When Shouldn’t You)?

There are situations where it’s normal and lawful for a salary to be described as “inclusive” of holiday entitlements - but it needs to be handled carefully.

Common Situations Where It Can Make Sense

You’ll usually see “including public holidays” language used when:

• The employee is paid a fixed annual salary and you don’t want payroll to fluctuate wildly week-to-week.
• The employee’s pay is well above minimum wage and the salary clearly compensates them for the overall package (including paid leave entitlements).
• The business wants a stable cost base across the year (for example, budgeting labour costs in a café, retail store, or services business).

Even in these cases, you should still be able to show (if challenged) that:

• the employee received at least what they would have received if you calculated entitlements strictly each time, and
• the employee’s agreement is clear on what is and isn’t included.

Situations Where It’s Risky Or Often Misused

The phrase becomes risky when it’s used to justify outcomes like:

• not paying time and a half when someone works on a public holiday;
• not providing an alternative holiday when required;
• reducing someone’s pay in a week with a public holiday because “they didn’t work the day”; or
• treating public holidays as if they’re the same thing as annual leave (they’re not).

If you’re ever relying on “inclusive” wording to pay someone less than they’d otherwise receive under the Holidays Act, that’s a red flag.

How To Draft “Inclusive” Clauses Without Creating Payroll Problems

If you want to use “including public holidays” wording, the goal is clarity: everyone should understand what happens when a public holiday occurs, and payroll should be able to apply it consistently.

Here are practical drafting tips (and what they’re trying to prevent).

1) Separate “Fixed Salary” From “Holiday Entitlements”

A good agreement doesn’t just say “salary includes public holidays” and leave it there. It distinguishes:

• what the salary is (e.g. $X per annum, paid fortnightly), and
• what happens on public holidays (paid day off if otherwise working day; time and a half + alternative holiday if worked).

This reduces the chance that your payroll team (or your bookkeeper, or you on Xero at 10pm) interprets the clause as “no extra obligations”.

2) Be Clear On “Otherwise Working Days”

One of the hardest things about the Holidays Act is that entitlements depend on whether the day is an “otherwise working day”.

To make this workable, your agreement should clearly set out:

• the employee’s ordinary days and hours (or how their roster is set), and
• how roster changes are communicated and recorded.

This is particularly important for casual, part-time, or rostered roles. If you’re unsure whether someone is genuinely “casual” (and how leave entitlements apply), it’s worth getting this right from the outset - the rules can be nuanced for casual workers leave entitlements.

3) Don’t Use “Inclusive” To Replace The Time-And-A-Half Rule

From a risk perspective, the most common (and expensive) mistake is assuming a salary can simply “absorb” the legal requirement to pay time-and-a-half on public holidays.

If an employee works on a public holiday that would otherwise be a working day, they’re generally entitled to:

• time and a half for the hours worked (based on relevant daily pay/average daily pay as applicable), and
• an alternative holiday.

You can structure an overall compensation package so the employee is well-paid on an annual basis, but you still need to administer public holiday entitlements properly (including keeping records that show compliance).

4) Make Sure Your “All-In” Pay Still Meets Minimum Wage Rules

Another trap: paying a salary that looks fine annually, but when you spread it across actual hours worked (especially in peak seasons), it drops below minimum wage.

This can happen when:

• hours increase informally over time (“just stay until it’s done”),
• public holidays create longer trading weeks, or
• the role evolves but the salary doesn’t.

Even if your agreement says “inclusive”, you’re still responsible for ensuring pay remains lawful in practice.

5) Keep Your Employment Documents Consistent

Your agreement should align with your other documents and policies, like:

• your leave policy,
• your payroll processes, and
• your workplace rules about attendance and rosters.

For many small businesses, it’s useful to consolidate expectations in a Staff Handbook, so you don’t need to cram every practical detail into the employment agreement itself.

Common Scenarios Small Businesses Run Into (And How To Handle Them)

“Including public holidays” becomes messy in real-life scenarios. Here are some common ones, with practical guidance on how to approach them.

Scenario 1: “We’re Open On Public Holidays - Do We Have To Pay Extra?”

If your business trades on public holidays (hospitality and retail often do), the key question is whether that day is an otherwise working day for that employee.

If it is, and they work, you generally need to provide:

• time and a half for hours worked; and
• an alternative holiday.

If your agreement says salary is inclusive, you’ll want to double-check your payroll settings still ensure the employee receives at least the additional half-rate required by law, and that alternative holidays are tracked and taken.

Scenario 2: “The Employee Didn’t Work Because It Was A Public Holiday - Do We Still Pay Them?”

If the public holiday falls on a day the employee would normally work, they’re generally entitled to a paid day off.

For salaried employees, this often looks like “no change” (they’re paid their usual salary).

For waged employees, it means paying relevant daily pay/average daily pay even though they didn’t work.

Problems arise when a business says “your pay includes public holidays” and then doesn’t pay for the day off. If it was an otherwise working day, that usually won’t be compliant.

Scenario 3: “Can We Tell Staff To Take Annual Leave Around Public Holidays?”

Sometimes businesses want to close for a period (for example, over Christmas/New Year) and manage staffing costs by directing annual leave.

There are rules around when you can require annual leave, including notice requirements and what your agreement says. If this is something you do (or want to do), it’s worth checking the details on forced annual leave.

Also, annual leave and public holidays are different entitlements. A public holiday that falls during a period of annual leave is generally treated as a public holiday (not annual leave) if it would otherwise be a working day - which can affect leave balances and payroll.

Scenario 4: “We Want To Reduce Hours Or Change The Roster”

Changing roster patterns can indirectly change public holiday entitlements (because it can change which days are “otherwise working days”).

Be careful about changing hours without a proper process and documentation. If you’re reducing hours due to business conditions, you generally can’t do that unilaterally unless the agreement clearly allows it and you follow a fair process.

If this is on your radar, it may help to look at how to handle reducing staff hours in a compliant way.

Scenario 5: “Can We Pay A ‘Higher Rate’ Instead Of Public Holiday Entitlements?”

Some businesses try to simplify payroll by paying a flat higher hourly rate and saying it covers:

• annual leave,
• public holidays, and
• sick leave.

This is very risky unless it’s structured in a way that clearly complies with minimum entitlements (and in many cases, it won’t).

In particular, public holiday entitlements (like time and a half and alternative holidays) are triggered by specific events and usually need to be provided in the way the Holidays Act requires - not just “averaged out” informally.

Key Takeaways

• The phrase “salary including public holidays” is usually about a fixed salary structure, but it doesn’t remove minimum public holiday entitlements under the Holidays Act 2003.
• If a public holiday falls on an employee’s otherwise working day, they’re generally entitled to a paid day off if they don’t work, or time and a half plus an alternative holiday if they do work.
• “Inclusive” clauses are most effective when they’re clear on ordinary days/hours and are supported by payroll practices that still deliver the correct entitlements.
• A common compliance risk is using “inclusive” wording to avoid paying time and a half or providing alternative holidays - this can lead to arrears and disputes.
• If you need to manage staffing around public holiday periods, be careful not to confuse public holidays with annual leave, and make sure any direction to take leave is lawful.
• When in doubt, updating your Employment Contract (and aligning it with your policies and rosters) is one of the simplest ways to reduce risk and keep payroll consistent.

If you’d like help updating your employment agreements or reviewing “inclusive” pay clauses so they actually work in practice, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.