In 2018 the Government set up a Taskforce to suggest improvements to the Holidays Act 2003 (“the Act”). It reported its recommendations in 2019, but it was not until earlier this year that the Government has just published the recommendations and its response. The Government has said that it has approved all of the recommendations.

The Taskforce made 22 recommendations, supposedly to make the Act clearer, simpler and fairer. Recommendations include:

  • Introducing a method for calculating holiday pay, which is intended to be better suited to calculating holiday pay when employees have variable work patterns. Annual leave is to be paid at the greater of:
    • Ordinary Leave Pay (base rate plus any scheduled overtime, allowance, commission and incentive payments); 
    • average weekly pay for the last four weeks; 
    • average weekly pay for the last 13 weeks; or
    • average weekly pay for the last 52 weeks.  
  • Calculating employee’s holiday entitlement as a portion of week/s.
  • That employees may take annual leave in advance on a pro-rata basis, rather than waiting for it to become available at the end of each 12 months of employment (NB, this merely reflects what most employers presently allow).
  • Removing the “parental leave override” from the Parental Leave and Employment Protection Act 1987, so that parents/workers accumulate annual leave at the full rate while on parental leave
  • Removing the ability to pay fixed term employees’ holiday pay “as you go” (NB presently only available for fixed-term agreements of less than 12 months).
  • Tightening up on the ability to casual employees’ holiday pay “as you go” (including that employers must review the work pattern every 13 weeks).
  • Removing the ability to require employees to be available or on-call when on annual leave.
  • A more comprehensive definition of “gross earnings” for calculating holiday pay (expanded to cover “all cash payments received, except for direct reimbursement for costs incurred”).
  • Eligible employees should be entitled to one day of sick leave from their commencement date, with an additional day per month of employment accruing.
  • Allowing sick leave and family violence leave to be taken in parts of a day (a minimum of a quarter of a day).
  • Extending the list for whom bereavement leave applies, to include stepfamily, family by marriage, cultural family groups, and extended family.
  • Clarification to the rules around annual closedowns. 
  • A new prescriptive method of working out what would be “otherwise a working day” for leave purposes (e.g. public holiday entitlement).
  • A new test for which employees are eligible for sick, bereavement and family violence leave.
  • Giving employees the option of choosing to transfer their leave entitlements to the new employer, or to have them paid out, in the event of a sale/transfer of a business.
  • Requiring employers to keep more comprehensive leave records that show how leave entitlements and calculated, paid, and held.
  • That employers must provide pay slips to employees for each pay period.

The changes are likely to increase compliance costs (especially initially), and increase the overall cost of employers’ leave obligations. The changes will especially impact employers who uses flexible and variable working arrangements, so will be significant for the hospitality industry.

The proposed changes need to complete a Select Committee process, and the Government plans to introduce legislation to Parliament in early 2022.