Holidays Act Changes Have Been Recommended

You may have read in the news over the last couple of weeks that the Holidays Act (“the Act”) has had an overhaul.  Part of this was due to the confusion over payments to staff under the Act.

Many haven’t understood that under the current Act holiday pay can be calculated either on the basis of ordinary weekly pay at the beginning of the holiday or the average weekly earnings over the previous 12 months.  However employers MUST pay whichever give the employee more money.

This has resulted in businesses unintentionally getting this wrong and ending up in a position of owing employees leave.

A taskforce was put together to review the Act and they submitted their final report with recommendations in October 2019.  The purpose of the recommendations is to give greater transparency and clarity to the Act.

The Government has accepted all the recommendations with the Workplace Relations and Safety Minister Michael Wood advising that he expects to introduce the legislation early next year.

Among the recommendations included were:

• 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; and
• Requiring payslips, so employees know what their used and remaining leave entitlements are, and how they were calculated.

The cost of implementing new systems and training staff up will be a short term cost, but will be outweighed by the long term benefits of being able to get it right.

We recommend that providing payslips to your employees now (if you don’t already) is a simple change that you can make before the recommendations come into play.

We would also like to remind you all that the extended sick leave change from 5 days to 10 days is not yet law and is still going through the select committee process.

Please continue to calculate your staff’s sick leave on the current basis of 5 days.

Remember, if you have any questions on HR or payroll matters, you can contact our HR/Payroll Manager Amanda via amanda@mbsadvisors.co.nz

We will be in touch next year with updates once the recommendations have become legislation.