Figuring out how to pay people on leave can be a headache.
If you’ve got staff on variable pay like base salaries plus commissions, you’ve probably run into the same question GD Tauranga did:
Should you pay them Relevant Daily Pay (RDP) or Average Daily Pay (ADP)?
This article breaks down what happened in that case, what the Holidays Act says, and how to decide what works best in your situation.
(This is not legal advice. It’s practical guidance based on experience.)
What Happened in the GD Tauranga Case
GD Tauranga sells house-and-land packages. Their sales consultants get a base salary plus commission when a sale goes unconditional.
For years, the company paid them using ADP for FBAPS leave (sick, bereavement, family violence, alternative and public holidays). An internal accountant later flagged this, and the company switched to RDP.
The employees disagreed. They argued that because their pay varied, the company had to use ADP. The case went all the way to the Employment Court.
Read the full Employment Court judgement.
This forced the Court to answer a simple but important question: When can an employer use ADP instead of RDP?
RDP vs ADP in Plain English
What is Relevant Daily Pay (RDP)?
RDP is what the employee would have earned if they worked that day. It includes base pay, commissions, incentives, overtime, and benefits they would normally get on that day.
What is Average Daily Pay (ADP)?
ADP is the employee’s total gross earnings as outlined in Section 14 of the Holidays Act, over the past 52 weeks divided by the number of full or part days worked.
The Big Question – When to Use RDP or ADP
This case hinged on one word in the Holidays Act: “may”.
Section 9A says employers may use ADP if either:
- RDP is impossible or impractical to work out, or
- the employee’s pay varies within the pay period.
The employees argued “may” meant “must” if pay varies.
The Court disagreed. It ruled that if RDP can be worked out, the employer can choose to use RDP even if pay varies.
This gave employers flexibility, as long as staff aren’t left worse off.
Practical Takeaways for Employers
- Try to calculate RDP first. If you know what they would have earned, use that.
- Use ADP only when RDP can’t be calculated or would be too complex.
- Don’t lock a fixed rate into contracts unless it’s equal or better than RDP.
- Check the impact of leave on commissions. If leave doesn’t affect them, RDP works fine.
- Stay compliant. You can’t contract out of the Holidays Act.
- Automate your calculations if you can – payroll tools can do this.
Real-World Examples
RDP works fine – you know their hours and commission schedule.
Retail staff with daily sales commissions:
ADP might be better, because you can’t predict daily earnings.
If using ADP:
Don’t top up extras already counted in ADP (like higher duties). Avoid double-paying.
Bottomline: If you know what they would have earned, use RDP. If not, use ADP.
Frequently Asked Questions
Can we pay a flat rate for all leave?
No. You can’t contract out of the law. Holidays Act rules apply no matter what your contract says.
Can we switch between RDP and ADP?
Yes. If RDP becomes impractical, you can use ADP (and switch back when things stabilise).
Do commissions always count in RDP?
Only if they would have been earned that day.
Final Thoughts
The Court sided with GD Tauranga. If RDP can be calculated, you can choose to use it even for staff on variable pay.
The key is fairness, practicality, and compliance.
Be clear with your team, document your method, and review it as roles change.
Need help making sure your payroll setup is compliant?
Not sure if your system handles RDP and ADP correctly?
