New Zealand employers should be aware of upcoming changes to the Holidays Act, which is currently under review. The review of the Holidays Act began back in 2018, and it is expected that changes will be implemented in the near future. However, with an upcoming election, it remains to be seen whether the changes will be made before the end of the year.
The primary focus of the review of the Holidays Act is to remove ambiguity, making it easier for employers to comply and for employees to understand their entitlements. Some entitlements are also proposed to be expanded so more employees can access leave entitlements and access them sooner. Currently, the calculations in the Act, specifically that of holiday pay, is a complex process that is difficult for many employers to understand and implement correctly, resulting in ongoing underpayment and miscalculation of entitlement claims.
Proposed changes include increased access to some leave entitlements:
- Annual holidays will be able to be taken on a pro-rata basis in advance of their entitlement.
- Employees will be entitled to bereavement leave and family violence leave and to begin accruing sick leave from the first day of employment. Other employees will be eligible after three months rather than six months if they meet the new tests.
- Bereavement leave will be expanded so that employees can access three days of leave for more types of family members.
- The parental leave override will be removed, meaning employees returning from parental leave will be paid according to the normal rules for annual holidays rather than their pay only being based on their average weekly earnings over the last 52 weeks.
There are also changes proposed relating to how leave is calculated:
- A new test for when an employee may receive their annual holiday entitlement on a ‘Pay-As-You-Go’ basis and clear rules for reviewing whether it can continue to be used throughout the course of employment.
- New methods to calculate the amount of leave entitlement an employee uses when taking leave include a new formula for employees with variable working arrangements.
- New leave payment formulas and definitions to provide greater clarity, including a new definition of ‘gross earnings’ and a new ‘Ordinary Leave Pay’ calculation to replace Ordinary Weekly Pay and Relevant Daily Pay.
- A new test to determine an ‘Otherwise Working Day’ for identifying days on which these entitlements apply.
The proposed changes also aim to give employees greater transparency:
- Additional record-keeping requirements to ensure employees know their entitlements and employers have the data required to complete the calculations and tests accurately.
- New, more defined requirements related to the process for having a closedown period.
- A requirement to provide a pay statement in each pay period, defining leave calculations and hours of work to provide greater transparency about leave and pay for employees.
Overall, the proposed changes aim to simplify the calculation of holiday pay to make it easier for employees and employers to understand and ensure that employees are paid correctly for all work-related activities.
As mentioned, regarding the timing of changes, it is unclear whether the proposed changes to the Holidays Act will be implemented before the end of the year. With an upcoming election, it is highly possible that the review of the Holidays Act may be delayed until after the election. However, the proposed legislation will still need to make its way through the parliamentary process, which includes giving the public opportunities to make submissions on the contents of any proposed Bill, so keep an eye out for this on the legislation.govt.nz website if you wish to submit feedback.
However, it is important for employers to be aware of the proposed changes and begin preparing for their implementation. Employers should start reviewing their current processes for calculating holiday pay and ensure that they are compliant with any changes to the law. To prepare for the changes to the Holidays Act, employers should take the following steps:
- Review Current Processes: Review your current processes for calculating holiday pay and ensure that they are compliant with any changes to the law. This may involve seeking advice from a legal professional or workplace specialist.
- Update Employment Agreements: Update your employment agreements to reflect any changes to the law. This will ensure that your employees are aware of their entitlements under the Holidays Act.
- Train Staff: Train your staff on any changes to the law and ensure that they understand their entitlements under the Holidays Act. This will help to avoid disputes and ensure that employees are paid correctly.
- Update Payroll Systems: Update your payroll systems to ensure that holiday pay is calculated correctly and employees are paid for all work-related activities.
In summary, employers should be aware of the upcoming changes to the Holidays Act and begin preparing for their implementation. While it is unclear whether the changes will be implemented before the end of the year, it is important for employers to start reviewing their current processes and ensuring that they are compliant with any changes to the law. By taking these steps, employers can ensure that they are treating their employees fairly, prevent penalties for non-compliance and have peace of mind knowing they are meeting their obligations under the Holidays Act.
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