It is no secret the Holidays Act contributes to many employers’ headaches, stress and frustration. Now, the Employment Leave Bill (the Bill) has recently been introduced to Parliament with the intention of replacing the Holidays Act and making leave entitlements simpler and less expensive.
This proposal is not law, so some aspects may change. Once the Bill is in force, there is an intended 24-month period to allow employers to begin working with the new system. As such, it is important to start thinking about these changes and be prepared for them.
The Bill changes the way leave is accrued and taken by:
- classifying the type of hours worked by an employee;
- accruing leave based on the number and type of hours worked (rather than an annual entitlement for leave, as we have now); and
- introducing a “Leave Compensation Payment” to deal with leave for casual and overtime hours.
Classification of hours
“Standard hours” are the hours an employee is required to work under their employment agreement. Standard hours include “availability hours”, that is the hours an employee is required to be available to work, even if they do not actually work all of their availability hours each week.
“Additional hours” are hours an employee works on top of their standard (and availability) hours. If an employee works additional hours, the employer must pay the employee more for the additional hours.
“Casual hours” are hours worked when an employment agreement does not require the employer to offer work or the employee to accept any work offered.
The Proposal: Leave based on hours worked
Currently, an employee becomes entitled to four weeks annual leave after 12 months of continuous work and 10 days sick leave after six months.
Under the proposal, leave would instead accrue in hours. Annual leave would accrue at 0.0769 hours for every standard hour worked and sick leave at 0.0385 hours for every standard hour worked. Leave would be available immediately when it is accrued (rather than having to wait 12 months to be entitled to annual leave), and employees can take their leave in hours, instead of days. Importantly, workers would no longer accrue leave while being on ACC but would still accrue leave while on annual or sick leave.
Leave Compensation Payment (LCP)
Casual and additional hours will be dealt with differently under the proposal. Currently, employees working casual hours are “paid as they go”, that is, being paid 8% of gross earnings each pay period instead of receiving paid annual leave.
The proposed Leave Compensation Payment (LCP) is intended to compensate casual workers for not receiving paid annual or sick leave, or salaried workers in agreed instances of extra work (those “additional hours” noted above). The LCP would be a separate payment to wages, proposed at a rate of 12.5% of gross earnings. If a salaried employee works extra hours under an availability provision (which is already compensated for in their salary), then those “availability hours” would not be considered additional, meaning no leave would accrue and the LCP would not be payable.
Public Holidays
The test for public holidays and when a day is an “otherwise working day” is also set to change. In the first instance, the employer must look at the days of work or a pattern of days of work in the employment agreement. If it is not clear from the agreement, a new 50% test applies: if a worker has worked a specific day of the week 50% or more of the time in the preceding 13 weeks (such as working 7 of the last 13 Mondays), that day qualifies as an otherwise working day. Alternative leave entitlements for public holidays would also change under the proposal.
Workers would accrue alternative leave in hours, at the rate of one hour’s alternative leave for every hour worked on the public holiday. This alternative leave could be taken at any time, and a worker can also request to cash up accrued alternative leave at any time.
There is some way to go in the law-making process, but you can start getting ready now.
How can we help?
WRMK Lawyers has Northland’s largest team of employment law specialists. We help our clients with all their employment processes. If you’d like advice on managing holiday pay, shutdowns or the upcoming changes, please give us a call.
WRMK Lawyers takes all reasonable care to make sure that the information in this article is up-to-date and accurate at today’s date. It is necessarily general information and not intended as legal advice to be relied upon.
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