Bill clarifies holiday entitlements

March 2003

The government's proposed changes to the Holidays Act have provoked considerable media comment in recent weeks, fired by the introduction of a separate Private Member's Bill to provide every New Zealand worker with four weeks' annual leave.

While the government's Holidays Bill retains the current three weeks' leave provision, it does include a number of changes likely to affect employers, such as increased pay rates for working on a public holiday and extended provisions for special leave.

Background

The Holidays Act 1981 came into force at a time when a predominately full-time labour force worked a standard Monday-Friday working week.

Much has changed in 22 years and many argue that an overhaul of our holidays legislation is long overdue.

Last year, 75 per cent of all complaints to the Labour Inspectorate and 26 per cent of all enquiries to the Employment Relations Service Info Line concerned the current holidays legislation. The high number of enquiries suggests that the present Holidays Act is difficult to understand and apply in practice.

New Bill introduced

In an attempt to modernise and simplify our holidays legislation, the Holidays Bill was introduced to the House on 18 February.

Minister of Labour Margaret Wilson said that the new holidays legislation was the latest in a series of government initiatives designed to modernise the workplace. The Bill is the product of extensive consultation with a number of representative parties.

Proposed changes

The Holidays Bill, when enacted, will replace the Holidays Act 1981. It is designed to clarify holiday entitlements and reflect judicial decisions made since the original Act came into force.

• Annual holidays
  
  The Bill retains the current provision of three weeks' paid annual holiday for all employees.
  
  The controversial provision of four weeks' leave is proposed in a separate Bill, the Holidays (Four Weeks' Annual Leave) Amendment Bill, and the government has indicated that it does not intend to support this additional proposal.
  
  
• Public holidays
  
  The Bill retains the same 11 public holidays as the current Act but proposes different payment terms for those public holidays.
  
  The Bill provides that if an employee works for any part of a public holiday, the employer must pay the employee at the rate of time and a half for their work.
  
  Also, if an employee works on a public holiday that would otherwise be a working day for that employee, the employee is entitled to another day's holiday - called an "alternative holiday".
  
  Increased pay rates on public holidays and the additional cost involved will not be popular with employers. However, the pay increase is likely to be well received by those employees required to work on days that most others enjoy as holidays.
  
  
• Sick leave and bereavement leave
  
  The current Holidays Act provides a minimum entitlement of five days per year that can be taken for sick leave and/or bereavement leave.
  
  The new Bill provides that an employee, after the completion of six months' continuous employment, will be entitled to five days' sick leave and three (or, in some cases, one) days' bereavement leave.
  
  Interestingly, the Bill also allows an employee to carry over any sick leave - up to a total of 15 days - onto the next year.
  
  The Bill proposes that an employer must provide an employee with three days' bereavement leave on the death of a person listed in the Bill as a close family member.
  
  In addition, one day's bereavement leave must be provided to employees on the death of any other person not specifically listed in the Bill. Before allowing the leave, the employer must accept that the employee has suffered a bereavement as a result of the death.
  
  To establish this, the Bill lists the relevant factors an employer should take into account. These factors include the closeness of the association between the employee and the deceased person, whether the employee has a responsibility for funeral arrangements, and whether the employee has any cultural responsibilities in relation to the death.
  
  It is unlikely that many employers would normally make such enquires about the relationship between the employee and the deceased - however, the Bill permits this.
  
  
• Enforcement penalties
  
  Penalties for offences under the Bill will increase significantly.
  
  While the Holidays Act contains penalties of up to $500 (and $100 for every day during which the offence continues), the Bill proposes that penalties for non-compliance increase to $5,000 if the employer is an individual and to $10,000 if the employer is a company or other body corporate.
  
  
• Informing employees
  
  In line with the philosophy behind other employment legislation enacted by the current government, the Bill provides that an employer must inform the employee about his or her holiday entitlements when the employee enters into an employment agreement.
  
  This is intended to ensure that employees know what they are entitled to from the beginning. More importantly, it will serve to reinforce to the employer exactly what the new legislation requires.
  

Conclusion

Employees are likely to welcome the new Bill, given that its changes are largely beneficial to workers.

There may be some disappointment over the government's retention of the three weeks' annual leave entitlement, rather than the four weeks proposed in the alternative legislation.

Employers will be pleased that the new legislation is clearer and easier to understand but will not welcome the potential for increased costs through increased wages bills on public holidays and the requirement for more special leave.

However, as three governments have tried - largely unsuccessfully - to make changes to the Act, perhaps the present Bill is as clear and fair as a law change in this complex and controversial area can be.

Advice and information

Bell Gully's Employment Team can advise you on all types of employment issues, including the new Holidays Bill. Contact the team at the numbers below for more information.