The Government has announced that they will be reforming the Holidays Act 2003 (“Holidays Act”). The Holidays Act can be difficult to navigate and has long since caused issues in calculating leave entitlements and payments. The Employment Leave Bill (“Bill”) aims to consolidate and simplify leave entitlements and payments, enhancing certainty and clarity for employers and employees alike.
Key Proposed Changes
While the new Bill outlines a range of new changes (an overview of all the changes can be found at the MBIE website), the below are a few of the significant ones proposed;
Annual Leave
- Annual Leave will accrue continuously in hours from day one, rather than the current entitlement of four weeks’ annual holidays after 12 months’ continuous employment. Leave will also be taken in hours and employees will be able to use their leave hours to take any part of a day off work.
Sick Leave
- Under the Bill, Sick Leave will also begin to accrue from day one of employment, meaning that employees will earn sick leave in direct proportion to their contracted hours. Therefore, not all employees will receive the same amount of sick leave anymore.
Casual Employees and Additional Hours of Work
- For hours worked by casual employees, and hours worked for other employees over and above contracted hours (except where those hours are compensated by salary), there will be a 12.5% leave compensation payment in lieu of annual and sick leave accrual.
Payment of Leave
- The way leave is paid will also change. The same hourly leave pay rate will be used for all types of leave. It will be based on employee’s base wage for the day of leave. Fixed allowances will also continue to be paid in full during leave.
Public Holidays
- Public holiday entitlements will be based on a new clearer test for determining whether an employee would have otherwise worked on the day.
Now is a great time to review your employment agreements – it is critical that employers are aware of what their current agreements provide, particularly where those do not reflect the above, and that employers get advice early.
Further, while employers will have 24 months from enactment to get their systems, contracts, and payroll practices in order before the new regime fully commences, it is prudent for employers to be liaising early with their payroll providers to ensure that leave entitlements, once the new framework comes into force, can be calculated and applied correctly.
Communication with staff about the changes will also be important, especially if some staff feel they are worse off under them. Again, early advice can help with this.
Please note that this article is not a substitute for legal advice and you should contact your lawyer about your specific situation. Please feel free to contact us to discuss how we can support you.
