Happy Holidays Act?

Thursday, February 25, 2021

The current primary legislation for holidays and leave is the Holidays Act 2003. However, not only is this Act considered to be outdated, it has also long been criticised for its complexity. In 2018, the Government appointed a taskforce to review the legislation and recommend changes, and the Labour Party’s 2020 election manifesto promised “We will strengthen and simplify the Holidays Act.” This promise included pledges to:

  • simplify employers’ leave calculations,
  • allow employee sick leave and annual leave to accrue over time instead of becoming available only after 6 and 12 months of employment respectively,
  • allow employees to take bereavement leave when needed, irrespective of obsolete rules around family framework structure,
  • increase sick leave entitlement to 10 days, and
  • introduce an additional public holiday.

On Tuesday 23 February 2021, it was confirmed by the Workplace Relations and Safety Minister, Michael Wood, that all 22 of the recommendations made by the Holidays Act Taskforce in its October 2019 report have been accepted. We have examined how this will look in the context of Labour’s election promises.

Simplified leave calculations

A new and easier calculation will be used to determine how much staff should be paid while on leave. All leave will be based on the greater of ‘Ordinary Leave Pay’, which is the pay the employee would have earned had he/she been at work, or ‘Average Daily Pay, which is an averaged amount calculated over either the last 4, 13, or 52 weeks.

This will also apply for employees returning from parental leave, who are not currently entitled to anything in holiday pay on returning to work because leave calculations are based on the previous twelve months. This parental leave ‘override’ will be removed to address discrimination against parents who take time off to care for their young children. Instead, employees returning to work following parental leave will be paid at their full rate for annual leave.

To ensure transparency in respect of these updated processes, employees will be entitled to receive payslips so they can see how their leave is calculated.

Leave availability

Employees will continue to become entitled to four weeks’ leave after 12 months of continuous employment (the present position) but they will also have the ability to take leave in advance on a pro-rata basis. While this reflects the policy followed by many employers, it is not currently a requirement. Annual holiday entitlements will also be calculated, taken, paid, and held in weeks or portions of weeks.

In addition, eligible employees will be entitled to bereavement leave and family violence leave from the first day of their employment and will also begin accruing sick leave. Employees will be entitled to one day’s sick leave from their first day of employment, with an additional day accrued per month until the minimum entitlement is reached. Bereavement leave will also be expanded to account for “a more modern understanding of family members”. This means employees will be able to access bereavement leave following the loss of someone outside their immediate family group, allowing for recognition of cultural family groups and more modern family structures.

There will be greater clarity in determining an ‘Otherwise Working Day’, and employees will have the ability to take sick leave and family violence leave in units of less than a day. This will be on a proportionate basis for time and pay with a minimum amount of a quarter of a day.

Other important changes

  • The Taskforce did not address the proposal to increase sick leave entitlement; however, the Government has already introduced the Holidays (Increasing Sick Leave) Amendment Bill to increase the minimum employee sick leave entitlement from 5 days per year to 10 days per year. The Bill proposes that:
  • the maximum amount of unused sick leave that an employee can be entitled to under the Act will remain at 20 days,
  • every employee would be entitled to 10 days’ sick leave each year (provided they qualify based on the existing conditions), regardless of their working pattern,
  • employees will receive the increased entitlement on their next sick leave entitlement date after the law commences (rather than all employees receiving the additional sick leave on the same day).
  • The Taskforce indicated that it was unable to reach a consensus view in relation to establishing an additional public holiday. However, Prime Minister Jacinda Ardern had previously announced on 4 February 2021 that New Zealand’s first Matariki public holiday will be held on Friday 24 June 2022. The public holiday will shift each year but will most likely always fall on a Friday or Monday between June and July.
  • Closedown provisions will be amended to provide greater transparency and certainty for employees. In addition, the requirement that holidays are paid out at 8 per cent and an employee’s anniversary date is reset will be removed (although it should still be possible for anniversary dates to be reset by agreement).
  • On the sale and transfer of a business, employees will have a choice about whether to transfer all of their leave entitlements to the new employer or have them paid out and reset.

The Government has indicated that it expects to have introduced new legislation by early 2022. However, this will then need to go through the full parliamentary process, meaning that businesses and employers will be given adequate time and guidance to prepare for these changes.

Our employment team is available to help with this preparation and can answer any questions or concerns you may have in anticipation of these changes.

 

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

 

Area of expertise

Share this publication