Government Promises Overhaul of Confusing Holidays Act

Workplace Relations and Safety Minister Michael Wood

Under proposed changes to the Holidays Act, employees will be eligible for a day’s sick leave from their first day of employment and will be entitled to receive payslips so they can see how their leave is calculated.

Workplace Relations and Safety Minister Michael Wood announced that the Government had accepted all the recommendations made by the Holidays Act Taskforce which submitted its final report in October 2019.

Their 22 recommendations included:

  • Entitling eligible employees to bereavement leave and family violence leave from their first day of work.
  • Giving eligible employees one day’s sick leave from their first day of work, with an extra day a month until the minimum entitlement is reached.
  • Extending bereavement leave to include more family members.
  • Removing the current parental leave ‘override’, so employees returning to work after parental leave will be paid at their full rate for annual holidays.
  • Requiring payslips, so employees know what their used and remaining leave entitlements are, and how they were calculated.

“The changes put forward by the Holidays Act Taskforce will make it easier to calculate entitlements and pay, giving employees and employers certainty and transparency,” said Wood.

“Business and union representatives reached consensus on these changes and we are delivering on our election commitment to implement them.”

Payment to staff under the Holidays Act has been a big source of cost and confusion for years.

Under existing legislation, holiday pay can be calculated either based on ordinary weekly pay at the beginning of a holiday, or the average weekly earnings over the previous 12 months. Employers must pay whichever gives the employee more money. Adding to the complexity were payroll role systems that did not recognise New Zealand law.

Following work by officials and payroll experts, Wood said he expected to introduce legislation early next year. Businesses would be given time to prepare for the changes.

Employees would be able to take leave during their first year of continuous employment, on a pro-rata basis – for example, they could take two weeks leave after working for six months. Currently, taking any leave before a year’s employment is at the discretion of the employer.

The taskforce proposed that annual holiday payments be paid at the greater of ordinary leave pay, average weekly earnings over the previous 13 weeks, or average weekly earnings over the previous 52 weeks.