Holidays Act set to be overhauled as government accepts improvements

The current legislation is often criticised as too confusing

Holidays Act set to be overhauled as government accepts improvements

New Zealand’s Holidays Act is set to be overhauled after the government accepted a raft of suggested improvements.

The Holidays Act taskforce looked at how to simplify the legislation after criticisms it was too complex and had caused a number of big businesses to underpay their workers.

Even the Ministry of Innovation and Enterprise had fallen foul of the law and identified underpayments during an audit.

NZ Police also identified a $39 million underpayment due to the Holidays Act which affected approximately 15,000 employees.

On Tuesday, workplace relations and safety minister Michael Wood announced that the government would implement all 22 recommendations made in the taskforce report.

“The Holidays Act 2003 encourages a healthy work-life balance by setting out minimum holiday and leave entitlements for employees. However, employers have found the legislative requirements hard to administer, which has meant costly fixes and employees missing out on their entitlements,” he said.

“The changes put forward by the Holidays Act Taskforce will make it easier to calculate entitlements and pay, giving employees and employers certainty and transparency. Business and union representatives reached consensus on these changes and we are delivering on our election commitment to implement them.”

Read more: Hamilton City Council move to rectify payment errors

The recommendations include:

  • Giving eligible employees one day’s sick leave from their first day of employment, with an additional day given per month until the minimum entitlement is reached
  • Extending bereavement leave to include more family members, including cultural family groups and more modern family structures 
  • Removing the current parental leave ‘override’ to address discrimination against parents who take time off to care for their young children. Removing this provision will mean that employees returning to work following parental leave will be paid at their full rate for annual holidays
  • Requiring payslips, so employees know what their used and remaining leave entitlements are, and how these were calculated

The new act bringing those recommendations into law is expected to be passed in early 2022.

The EMA has welcomed the overhaul to the Holidays Act but warned some of the changes will be difficult to implement.

It said the short-term burden of putting the new measures into place and rolling out staff training will be worth the long-term benefits to businesses.

Chief Executive Brett O’Riley said: “We know that businesses are unintentionally getting this wrong and are now in a position of owing employees leave, affecting their bottom line.

"A survey at one of our payroll conferences revealed that a quarter of payroll staff did not have any formal training, and the new Act provides the perfect opportunity to change that.”

Read more: Employer "recklessly shut their eyes" to Holidays Act obligations

NZ’s Council of Trade Unions has also welcomed the government’s announcement.

CTU President Richard Wagstaff, who was a member of the taskforce, said the recommendations will make life better for working people.

“The working group committed to making it easier for employers to understand the law so that they could apply the intent of the law correctly,” he said in a statement provided to HRD.

“The current Holidays Act has been poorly understood and implemented resulting in large numbers of working people not getting their correct entitlements, and large, lengthy and costly remediation processes undertaken to correct past mistakes and make firms legally compliant.”

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