Answer
When an employee takes annual holidays, the Holidays Act says they should be paid at the higher of Average Weekly Earnings (AWE) or Ordinary Weekly Pay (OWP). Lightning Payroll calculates both and uses the higher figure automatically.
Average Weekly Earnings (AWE)
- Calculated as the gross earnings over the last 52 weeks divided by 52.
- Includes regular wages, allowances that are part of normal pay, bonuses, commissions, and most other taxable payments.
- The 52-week lookback uses historic gross earnings if the employee was migrated from another payroll.
Ordinary Weekly Pay (OWP)
- The employee's normal weekly pay, calculated from the last 4 weeks of earnings.
- Used when the employee's normal weekly pay is clearly defined (e.g. salaried staff on a steady wage).
- If the last 4 weeks are not representative, Lightning Payroll falls back to a formula based on ordinary hours and rate.
How the valuation appears
When you enter annual holidays in the leave taken dialog, the valuation note shows which method was chosen and the weekly rate used. If AWE is higher, AWE is applied; if OWP is higher, OWP is applied.
Manual override
The rate field on the leave taken dialog is editable, so you can override the calculated rate for a specific case (e.g. when an unusual one-off payment has skewed AWE). Use this sparingly and document why.
The same valuation logic applies when annual holidays are paid out at termination.
