16.03.2021

Holidays Act Overhaul – Taskforce Recommendations

There have been calls for an amendment of the Holidays Act 2003 (Act) for some time.

Since July 2012, the Labour Inspectorate, which is part of the Ministry of Business Innovation and Employment (MBIE), has been conducting payroll audits of employers that employ at least 20 employees.  This process emerged in response to issues that were being raised about employers’ application of the Act.  So far, the Labour Inspectorate has conducted payroll audits of 241 employers and $237.7m has been paid to employees in arrears.

Employers like NZ Post, Restaurant Brands, Bunnings, the New Zealand Police and even MBIE have been left with large bills for the underpayment of their employees as a result of misapplications of the Act.  Fast food giant McDonalds could owe an estimated $90 million in arrears, affecting 60,000 employees over a 10 year period. 

As a result of ongoing issues with the Act, the Government established the Taskforce in 2018 to review and provide recommendations to improve the Act.  In 2021 the Taskforce published its 22 recommendations which were jointly agreed to by union and business representatives and accepted by the Government.  Further information on the Taskforce’s recommendations can be found here.

The Taskforce claims that its recommendations will improve the Act by providing a set of clear and transparent rules for establishing leave entitlements and payments, replacing the ambiguity of the Act’s current wording with easy to understand language.

The Taskforce continues the current Act’s regime of separating holiday entitlements (time) from the calculation of holiday pay despite the recommendation of many submissions to provide a simple regime that easily combined these elements.  In doing so, the Taskforce has missed the golden opportunity to provide holidays in a way that is easily understood, and more importantly calculated, by employees and employers, and consistent with the current accrual method of most payroll systems.  What is proposed appears to be a complicated patch rather than a transformational Holidays Act capable of adapting to evolving work practices.

Although the calculation of holiday pay was the most pressing issue on the Taskforce’s agenda, it also considered various other aspects of the Act.  Its key recommendations are:

  • Amendments to the rules and definitions for determining, calculating and paying leave entitlements;
  • Employees will be eligible for bereavement and family violence leave from their first day of employment;
  • Employees will begin accruing sick leave from their first day of employment;
  • Bereavement leave is extended for an additional 3 days and will include more family members, including cultural family groups and modern family structures; and
  • The parental leave override will be removed so that employees returning from parental leave will be paid fully when they take holiday leave.

These recommendations are yet to take effect, but are expected to be introduced into legislation by early 2022.  We will keep you informed on any developments.

If you have any questions about the Taskforce’s recommendations contact the Employment Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

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Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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