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Holidays Act Future Changes 2021

Challenges experienced by employers implementing the Holidays Act 2003 have been well documented over recent years. As a result of the complex Act over $90.4 million in holiday pay arrears owing have been identified through the Labour Inspectorate alone, and the expectation is that this figure will continue to grow.   This prompted the establishment of a Taskforce  to review the current Holidays Act and provide recommendations for improvement. On 23rd February 2021, the Government indicated that the 22 recommendations outlined in the Taskforce October 2020 report should be adopted in full. We can now expect to see legislative changes in early 2022 to the Holidays Act in line with these recommendations.

The report’s recommendations  include:

A new calculation to be considered for how much an employee should be paid while on annual leave, paying whichever sum is greater: the usual pay they would receive had they been at work, or an averaged amount calculated over either the last 13 or 52 weeks

A change to how annual leave is calculated for new parents who have returned from parental leave. Currently this is calculated using average weekly earnings for 12 months following their return, instead this would be calculated using the ‘greater of’ method used for annual leave.

Employees having the ability to take annual holidays within the first 12 months of employment up to the amount they would be eligible for on a pro rata basis.

Bereavement and family violence leave being available from the first day of employment.

Bereavement Leave to be extended to cover stepfamilies and cultural obligations. This will allow employees to access three days bereavement leave under more circumstances; including family cultural groups (e.g. whāngai relationships), aunts, uncles, nieces, nephews and family by marriage that are not already included within the act.

Establishing a 12th public holiday for Matariki which will normally be observed on a Friday or Monday. It has been confirmed the first Matariki public holiday will be observed on Friday 24th June 2022.

Several changes to annual closedown provisions including, employees who are not entitled to holidays at the time of a closedown will not be paid at 8% of their gross earnings or have their anniversary reset. Instead, employees would take leave in advance based on the recommended ‘pro rata’ holiday entitlement and the resetting of an anniversary date will need to be by agreement.

Removing the requirement for a 6-month waiting period for sick leave entitlement. Employees will be entitled for one day’s sick leave from their first day of employment, with an additional day per month until the full five days are reached.  Changes will allow sick leave to be used in units less than one day with a minimum amount of quarter of a day. Additional to the report’s recommendations the Government has already started the process to increase employee sick leave from five days to ten days with an introduction of a Bill to Parliament. It is expected this Bill will likely be passed in mid-2021.

Now the recommendations have been accepted by the government  we expect more details will emerge in the lead up to 2022 regarding these changes. Legislation will be introduced later in 2021 to amend the Holidays Act and information provided regarding effective dates. These are significant changes and organisations will need to ensure these new requirements are reflected correctly in employment agreements, policies and payroll processes.

If you would like further information and or advice about  your Holiday Act obligations and employee entitlements, please do not hesitate to contact us.

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