Employment lawyer offers advice for HR to avoid 'unexpected arguments from employees'
There's a general sentiment that the grip of talent shortages in New Zealand has somewhat loosened but Gartner's HR Top Priorities 2023 report revealed that recruitment is among the top five strategic initiatives that HR leaders are prioritising this year.
In response to the competitive talent market, HR leaders have busied themselves introducing innovative initiatives for attraction and retention. With flexibility as the top driver, offering additional leave and new forms of leave such as 'mental health days' and 'duvet days' have come to the fore.
Some Kiwi organisations are taking it a step further and implementing unlimited annual leave for their workforces.
Although the idea is relatively novel for New Zealand, major tech players such as Kickstarter, Netflix, and LinkedIn have been providing this benefit for years.
However, employment lawyer Jennifer Mills doubts the feasibility of this idea gaining popularity amongst organisations in New Zealand.
Minimum entitlements still apply
“The concept of ‘unlimited leave’ is more often adopted in countries that do not have a highly prescriptive regime of holidays and leave,” Mills told HRD.
“Not many employers will choose to adopt the concept of ‘unlimited leave’, as it would need to apply in addition to the prescriptive regime of holidays and leave in the Holidays Act,” she continued.
According to New Zealand employment law, the provision of annual holidays, sick leave, bereavement leave, and public holidays must align with the regulations set out in the Holidays Act 2003. While the act doesn't prohibit employers from offering additional holidays or leave, any offerings must still adhere to the Holidays Act.
“This includes ensuring that employees can take all of their minimum entitlements under the Holidays Act, that any unused annual holidays will be carried forward, and that all remaining annual holidays must be paid out upon termination,” said Mills.
Establish clear usage policies
For companies that choose to adopt unlimited leave, it will be crucial to draft clear company policies around how employees use the leave, she said.
“Companies who do offer unlimited leave will need to establish company policy around usage of the leave and carefully set out how annual holidays and any additional leave will be provided and paid to employees,” said Mills.
“At the very least, it would be in the employers’ interests to ensure that the 4 weeks of annual holidays are taken and exhausted, before any additional (unlimited) leave may be taken, otherwise an employer may face unexpected arguments from employees who believe they are still owed payments for unused annual holidays following the end of their employment.”
Auckland-based software company Actionstep has been offering unlimited leave to its employees since 2022.
Vice president of engineering, Stevie Mayhew, told One News that the company had been looking at options for better supporting their staff and landed on unlimited leave. The initiative seemed to be a hit with employees, with one saying he’d lost track of how many days he’d had off but it would become obvious very quickly if he was taking advantage of the system.
Though the idea is gaining traction in New Zealand, Mills doesn’t believe it will become common practice here.
“Some, but not many, employers in New Zealand provide unlimited leave. Here, it is more common to establish company policies that provide additional discretionary leave for specific purposes – such as discretionary sick leave, discretionary domestic emergency leave, discretionary bereavement leave, birthday-related leave, and additional leave designed to reward particular achievements such as long service or performance metrics.”
