Note 14: Employee entitlements

Accounting policy

Short-term employee entitlements

Employee benefits that are due to be settled within 12 months after the end of the year in which the employee renders the related service are measured based on accrued entitlements at current rates of pay.

These include salaries and wages accrued up to balance date, annual leave, time off in lieu earned but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave.

A liability for sick leave is recognised to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlements that can be carried forward at balance date, to the extent that it will be used by staff to cover those future absences.

A liability and an expense are recognised for bonuses where it is a contractual obligation or where there is a past practice that has created a constructive obligation and a reliable estimate of the obligation can be made.

Long-term employee entitlements

Employee benefits that are due to be settled beyond 12 months after the end of the year in which the employee renders the related service, such as long service leave and retirement gratuities, have been calculated on an actuarial basis.

The calculations are based on:

  • likely future entitlements based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement, and contractual entitlements information; and
  • the present value of the estimated future cash flows.

Critical accounting estimates and assumptions

Measuring retirement and long service leave obligations

The measurement of the retirement and long service leave obligations depend on a number of factors that are determined on an actuarial basis using a number of assumptions. Two key assumptions used in calculating this liability include the discount rate and the salary inflation factors.

Any changes in these assumptions will affect the carrying amount of the liability.

The discount rate is based on New Zealand Government bond data at 30 June 2024. The salary inflation factor has been determined after considering the Consumer Price Index.

If the discount rate were to increase/decrease by 1% from our estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $14,893 lower and $15,987 higher respectively.

If the salary inflation factor were to increase/decrease by 1% from the Office's estimates, with all other factors held constant, the carrying amount of the liability would be an estimated $18,477 higher and $17,477 lower respectively.

Breakdown of employee entitlements

Actual
2023/24
$000
Actual
2022/23
$000
Current employee entitlements
Salary and other accruals 2,312 2,800
Annual leave 5,151 4,577
Time off in lieu of overtime worked 212 208
Retiring leave 366 206
Sick leave 178 155
Total current employee entitlements 8,219 7,946
Non-current employee entitlements
Retiring leave 338 476
Total non-current employee entitlements 338 476
Total employee entitlements 8,557 8,422