Understanding the Upcoming Changes to the Holidays Act

Family picnic on holiday - NZ Holiday Act

The Government recognises that the current Holidays Act has been a source of frustration for workers, employers, and payroll providers for a long time. To address these concerns, the Government is prioritising reforms to the Holiday Act.

The Holidays Act Taskforce

The Holidays Act Taskforce was set up by the previous Government in response to a joint request from unions and employers. Their aim was to create clear and transparent rules for providing and paying holiday and leave entitlements.

The Taskforce made 22 recommendations, these included:

  • Clear Methods and Formulas: New ways to calculate leave entitlements, including specific formulas for employees with variable hours. Definitions for gross earnings and new payment calculations to replace the existing methods.
  • Eligibility Tests: New tests for Family Violence, Bereavement, and Sick leave. A new ‘Otherwise Working Day’ test to determine leave entitlement days.
  • Pay-As-You-Go Rules: Clear criteria for when annual leave can be paid on a pay-as-you-go basis and rules for reviewing its continued use.

What’s Happening Next?

In September 2024, the Minister for Workplace Relations and Safety, Brooke van Velden, will release an exposure draft of a Bill aimed at reforming the Holidays Act. This draft is essentially a preliminary version of the Bill, shared to gather feedback before it is officially introduced to Parliament.

Key Changes in the Exposure Draft

The main goal of the proposed changes is to simplify how holiday leave is calculated and to reduce the costs for employers. Here are some of the key points included in the draft:

  • Pro-Rating Sick Leave: Sick leave will be proportionate to how much an employee works.
  • Annual Leave Entitlement: Moving from a weeks-based entitlement system to a weeks-based accrual system.
  • Simpler Leave Calculations: New methods that don’t require accessing data about daily hours worked.
  • Pay-As-You-Go Annual Leave: Clearer criteria for using this system and a simpler review process.
  • Reference Periods: Only full pay periods need to be included in the 13-week reference periods.

Increased Access to Leave

The new legislation will also make it easier for employees to access leave:

  • From day one, eligible employees can take bereavement leave, family violence leave, and start accruing sick leave.
  • Others will be eligible after three months if they meet the new tests.
  • Employees can take annual holidays on a pro-rata basis in advance of their full entitlement.
  • Bereavement leave will be expanded to cover more types of family members.
  • Employees returning from parental leave will be paid according to normal annual holiday rules.

Greater Transparency for Employees

The proposed changes will also ensure greater transparency:

  • New requirements for managing closedown periods.
  • Additional record-keeping to help employers accurately calculate leave.
  • A requirement for pay statements in each pay period to clearly show leave and pay details.

What This Means for You

These changes aim to make the Holidays Act easier to understand and implement. While we await the finalisation of the new rules, it’s important for employers to continue following the current Act and ensure all employee entitlements and payments are correct.

Further information can be found at MBIE. Eclipse will monitor further developments and let you know so you can be ready for the changes when they come into effect.

 

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