The government has recently announced changes to the current Holidays Act. These changes aim for a simpler and more workable legislation than exists in the current Holidays Act 2003.
Proposed is a change from the gross earnings formula to a more straightforward model. The proposed new employment leave legislation is looking to replace the current annual leave and sick leave calculations. MBIE have detailed a review from the Holidays Reform Act legislation as follows:
- Sick leave will accrue continuously in hours from day one of employment, rather than a lump sum entitlement from 6 months of employment.
- Annual leave will accrue continuously in hours from day one, rather than accrued in days or weeks. Leave will also be taken in hours whereby employees will be able to use their leave hours to take a partial day’s leave.
- Sick leave will be earnt in direct proportion to the number of contracted hours.
- For casual employees or staff working over and above their contracted hours (except those that are compensated by salary in their employment agreement), there will be a 12.5% upfront payment instead of the annual and sick leave accrual.
Annual leave calculations are also set to change, as is the change to see an hourly leave pay rate, for all types of leave. Fixed allowances will continue to be paid in full, even when the employee is on leave. When annual leave is taken after embarking on parental leave, the proposed change will see this being paid out similar to annual leave and at the same rate, not at a reduced rate, as it is currently.
Alternative holidays will also shift to hours-based accrual and public holiday entitlements will be based on a simpler method for determining whether an employee would have otherwise worked.
It is hoped that these changes will simplify leave calculations for both business owners and employees. Before these variations take effect, it would be wise for all business owners to begin familiarising themselves with the proposed changes and ensure their payroll systems are compliant.
However, it is important to note that none of the proposed changes are final until the Bill has passed and there will be a 24-month implementation period from such time.
MBIE and Employment Hero have further detailed information accessible online: www.mbie.govt.nz and www.employmenthero.com
Alternatively, the team at MCI are always available for additional support. We welcome your queries; feel free to reach out to us today.