Holidays Act Workshop provides valuable information

The calculation of holiday pay has provided issues for employers and employees for a number of years and many organisations in both the public and private sectors a grappling with remediation projects to correct the payments. In many cases the payroll software used by organisation has been set incorrectly for the calculation of holiday payments. During July and August CLEW conducted workshops - ‘Changes to the Holidays Act – what is proposed and how will it work?’ - in conjunction with our annual seminar series in Auckland, Wellington, Christchurch and Dunedin. We were pleased to have some of the Holidays Act Review Taskforce to assist us with presentations.

There has been much discussion on what would make it easier for employers to do the calculations and unions have argued that employees should be able to have transparency in how their holiday pay is calculated. The Taskforce has addressed these issues in their report which was accepted in full by the Cabinet earlier this year. Work is now proceeding on developing the legislation and the implementation of the recommendations.

In the introduction to the workshop the Taskforce members emphasised that they had worked with a tripartite model and that the recommendations were sometimes at the point where the employer and union parties could agree but which applied the principle that no employee should be disadvantaged in terms of pay when they take any form of leave. As is stated in the Executive Summary of the report:

The Taskforce focused on achieving the following goals for two broad groups:

  • For those employees with clear, predictable work patterns, the Taskforce wanted to ensure that taking leave and calculating leave payments should be an easy and simple process.
  • For those employees with uncertainty about some or many aspects of their working arrangements (for example, unpredictable working hours and/or payment rates), the Taskforce wanted to ensure that there are clear prescriptive rules that employees and employers can use to accurately determine, calculate and pay leave entitlements.

At the workshop the Taskforce members explained each of the recommendations and the reasoning behind them. The recommendations that were of most interest to the attendees and generated the most discussion and questions were:

  • Annual holiday leave entitlement (and pay) will continue to be calculated in weeks or portions of weeks. (Recommendation 2)
  • There should be clear process for calculating a ‘portion of a week’ for the purposes of payment (Recommendation 4). The Act should set out a stepwise process to assist employers/employees in determining the portion of the annual leave entitlement, whenever leave is granted. This would be an addition to the Act as currently there is no guidance in the Act at section 21(2).
  • The clarification of when ‘Pay-As-You-Go’ can be used  with a proposed four-part test of an ‘intermittent or irregular’ working pattern. Employees on fixed term contracts of less than 12 months will not be included in the ‘pay-as-you-go’ category. (Recommendation 6).
  • A clear definition of ‘gross earnings’ to be used for leave payment calculations – ‘An employee's leave payment should reflect all cash payments received, except direct reimbursements for costs incurred.’
  • The entitlement for family violence, bereavement, alternate holidays, public holidays and sick leave (FBAPS leave) should continue to be held in days (Recommendation 9).
  • Eligible employees should be entitled to family violence and bereavement leave from the first day of employment along with one day of sick leave with an additional day per month until 5 days is reached at 4 months. (Recommendations 10.1 and 10.2) It remains to be determined how the new regulatory entitlement of 10 days will be provided.
  • There are recommendations for employees to be able to take sick leave and family violence leave in units less than one day with a minimum amount being one quarter of a day. (Recommendation 11) There is also a new eligibility test for this leave and recommendations on how it is calculated.
  • There is a new ‘Otherwise Working Day’ test (Recommendation 13) that includes an employee who was expected to work on the day and employees who have worked at least 50 percent of the corresponding day in the previous 4 or 13 weeks (whichever is applicable).

Attendees at the workshop raised a range of issues from their workplaces including the calculation when an employee has more than one role and with different rates for the roles; how it will work with ACC accredited employers (those who pay their employees the full pay and are paid the 80 percent of the employees pay directly from ACC); the situation of employees with widely varying hours and seasonal work. The Taskforce members addressed the queries and where they could not they were referred to MBIE to consider in the operationalisation of the recommendations.

The MBIE team attended the Wellington workshop and in Auckland via ZOOM. They outlined the process for implementing the recommended changes and timeline for the development of the legislation. MBIE stated the objectives for the project were to support development of an amended Holidays’ Act that:

  • Can be operationalised in digital payroll systems and is workable in practice across a range of employment types and situations.
  • Provides clarity and certainty for employers around the rules for determining leave entitlements and payments.
  • Supports employees to better understand their entitlements.

It is intended that there will be legislation before Parliament in the first quarter of next year followed by a period for the Select Committee process and legislation enacted in early 2023. There will be a period of transition before the legislation will apply.

The Powerpoint presentations from the workshop are available here - Workshop presentation and MBIE presentation.