Following announcements from Brooke van Velden (Minister for Workplace Relations), we finally have some certainty that we are going to get a replacement for the Holidays Act, along with some proposed answers to how the replacement rules will work. It is proposed the new legislation will be called the Employment Leave Act.
The Holidays Act 2003 has not been good for employers. As the Government now acknowledges, many diligent and well-intentioned employers, in the public sector as well and the private sector, have struggled to comply with the complexities of our existing system. The vast majority of NZ employers would be vulnerable to being told they have discrepancies in their holiday pay calculations, if you scrutinized their records in enough details and went back far enough.
The existing Act results in multiple anomalies and points of ambiguity and confusion. Existing key terms like Relevant Daily Pay and Ordinary Weekly Pay can be problematic. These problems especially impact the hospitality sector, where it is common for employees to work variable days and hours per week, variable hours per shift, and to commonly work hours that are significantly higher than their guaranteed minimum hours.
Under the proposed new system, entitlements will be allocated in hours (rather than in portions of a week), and will accrue from day one of employment. Employees will accrue 0.0769 hours of annual leave for each hour worked (generally equivalent to 4 weeks leave per year). Employees will also accrue 0.0385 hours of sick leave for each hour worked (generally equivalent to 10 days sick leave per year for someone who works 5 days a week).
There will also be a concept of leave compensation payments, for hours worked where annual leave does not accrue. This will apply to casual workers. It will also apply to ordinary waged workers when they do extra hours beyond their contracted hours (we are not sure exactly how that will work, as many employment agreements specify minimum guaranteed hours but not “contracted hours”).
The big advantage for employers with the proposed Employment Leave Act will be a system that is simpler and has less scope for ambiguity and error (at least, that is the intention). In some ways, it will cost employers less, and in some ways, it will cost employers more. Examples of pros and cons include:
- Employers will no longer have to pay for annual leave accruing when employees are away on ACC.
- Employers will no longer have to allocate 10 full sick leave days a year to employees who work less than 5 days a week.
- The existing 6 months stand down for sick leave, bereavement leave and family violence leave will no longer apply.
- Annual leave that accrues during parental leave will be payable at the full rate (at the moment, there is a confusing system where the rate for annual leave that accrues during parental leave depends on how long the employees was on parental leave for and how long after their return it takes for them to take the leave).
This has been a slow process. Governments have been conscious of problems with holidays and leave rules since last century. A taskforce was set up to review the Holidays Act in 2018, and the Government said it accepted the taskforce’s recommendations for change in 2020.
There is not a final form Bill yet. We expect to have the opportunity to make submissions to a Select Committee later this year, and we expect that there will be a Bill before Parliament early next year. If and when the new legislation is passed, there is a planned 2 years implementation period, before it fully replaces the existing Holidays Act.