Legislation Update - Increase in sick leave

The new Labour Government introduced its first piece of employment relations legislation to the House on 1 December, and Select Committee submissions are now open for the Holidays Act (Increasing Sick Leave) Amendment Bill and close on January 28.

The legislation is part of the Government's election manifesto in response to COVID-19. The main purpose of this bill is to increase the availability of employer-funded sick leave for employees. Through its introduction to Parliament, the Government is delivering on a key commitment to double annual sick leave entitlements.

At present, New Zealand workers have statutory entitlement to comparatively less paid sick leave than their counterparts in most other OECD countries, including those in Australia and most of Europe.  Under the Holidays Act, after an employee has been working for an employer for six months, they're legally entitled to at least five days' paid sick leave a year, and the employer must carry over up to 15 days of unused sick leave into the next year. Many employees, though, have greater entitlement under their employment agreement, in particular those on collective agreements.

CLEW's data collected from collective employment agreements suggests that this will reflect no real change for a majority of employees and their employers. In our 2020 data, 59 percent of employees across 39 percent of collective agreements currently have entitlement to 10 days or more sick leave per year. However, the increase in the statutory provision is more likely to impact the private sector than the public sector with only 38 percent of private sector employees, across 29 percent of CAs, currently entitled to at least 10 days sick leave. The increase in employees with an entitlement of at least 10 days annual sick leave began immediately following the global financial crisis of 2008-2009 and there has been a steady increase in this level of entitlement since that time.

Our analysis, of course, focuses solely on that part of the labour market covered by collective agreements. To that end, there may be a substantial difference between sick leave entitlement between collective and individual employment agreements. Nonetheless, the potential influence of collective bargaining on wages and conditions of all workers in a workplace, industry or entire labour market—what has been referred to as the ‘bite’ or ‘reach’ of collective bargaining—is an important factor to take into consideration in this regard. So, to the extent to which sick leave provisions in IEAs mirror those in CAs, the pattern we refer to here will apply across all employment agreements, both collective and individual, in a workplace, industry or entire labour market. In particular, what is provided in collective agreements in industries where union density is relatively high, provisions of negotiated CAs are likely to extend to non-union employees.

Research findings reported in the 2019 Southern Cross Health Society – BusinessNZ Workplace Wellness Survey that, despite evidence that fewer staff are likely to turn up to work unwell, the average rate of absence in 2018 was 4.7 days per employee. This compares with 4.4 days in 2016, 4.7 days in 2014 and 4.5 days in 2012.  Throughout the six-year history of the biennial survey, non-work-related illness has been the most common cause of absence, followed by caring for an unwell family member or dependent and non-work-related injury, all three of which are covered by sick leave under the Holidays Act. Also, since 2012, when the survey was first conducted, non-manual occupations have consistently shown to have higher rates of absence for illness and caring for others than manual occupations.

Only 5 percent of employers of manual employees and 10 percent of employers of nonmanual employees identified a feeling of entitlement to ‘sickies’ — sick days taken when one is not actually unwell — among the three main causes or drivers of absence. Considered in conjunction with evidence reported here that entitlement to sick leave has increased over the past decade or more, one inference to be taken from this is that the availability of more generous annual sick leave entitlement is unlikely lead to increased uptake of sick leave. This may explain why employers have apparently seen increased sick leave entitlement as a bargaining chip when negotiating changes to collective agreements.