Significant changes to leave legislation are on the horizon, and we want to ensure you are well-prepared for what lies ahead.
It’s about time!
Potential changes to the Holidays Act have been on the agenda through multiple Government terms, and we were starting to wonder if it would just keep ending up in the too hard basket. Too many employers have been caught out with unclear and complicated rules, so we welcome the simplification and clarity these changes bring.
It’s important to note that, while this is an important step forward, there is a 24-month lead time before the new Bill takes effect, so the Holidays Act remains in place for the time being.
That said, it is important to start thinking about how these adjustments will impact your business to make sure you don’t get caught out with either legislative breaches or additional cost when the change happens.
To help you get ahead of the curve, we have broken down the key updates below:
- Annual Leave: Accruals start from day one, proportional to contracted hours. Leave will be taken in hourly increments rather than full days. This will make life a lot easier for variable hours employees.
- Annual Leave Cash-up: Employees may request to cash up 25% of their annual leave entitlement every 12 months (following their work anniversary). This allows employees with more than 4 weeks of leave to cash out larger portions and could cost more for businesses with additional entitlements for long serving staff members.
- Sick Leave: Now earned from day one, proportional to hours worked, with a 160-hour cap. This replaces the current system of awarding 10 full days at once. Part-time staff will accrue leave based on their hours rather than receiving a flat 10 days, meaning less sick leave for part timers. This is what a lot of the complaints in the press have been about, but it seems a sensible approach.
- Bereavement & Family Violence Leave: Remains a fixed number of days but is accessible from the first day of employment.
- Casual Staff (“Pay as you go”): The rate increases from 8% to 12.5% to cover all leave types. Consequently, casual staff will no longer be eligible for paid sick or bereavement leave. This makes managing casuals easier but will increase your overall wage bill if you have many casuals in your workforce.
- Additional Hours: Permanent employees working above their contracted hours will receive a 12.5% loading for those additional hours. This is a big change and will particularly impact businesses who have rosters with minimum guaranteed hours and staff that regularly work over that.
- Public Holidays: Eligibility is now simplified to a single test: whether the employee worked 50% or more of that day in the preceding 13 weeks. Thank goodness for clarity, this will make public holiday pay a lot easier to manage.
- Alternative Holidays: These will accrue at an hour-for-hour rate, rather than as a full day.
- Leave Calculations: All leave types will now be calculated based on the employee’s base wage. Variable pay (bonuses, commission) is excluded; fixed allowances continue to be included. This will make it a lot easier to explain leave payments to your team and hopefully clear up many complaints.
- Parental Leave: When taking annual leave after parental leave, it will be paid at the standard rate. Previous “override” rules that reduced payment amounts have been removed. Many businesses do this anyway, but it’s great to see a move which supports new parents as they return to work.
That’s a lot!
And while there may be differing opinions about how good these changes will be, from the number of pay remediations required in the last 5 years – there is no doubt that it’s needed!
So, what does this mean for you and what steps should you take right now?
- Understand the changes: There is a 24-month transition period before the Bill takes effect. You have ample time to plan.
- Assess the impact: Evaluate how these changes affect your specific business model. Pay close attention to costs and scheduling, particularly if you rely on rostered staff or minimum-hours contracts. Identifying these impacts early will help you avoid surprises.
- Contact your payroll provider: They will be planning to manage the technical transition. Reach out to understand their implementation plan and timeline early to ensure your internal processes remain aligned and the change runs smoothy.
As these changes are made, it will mean amendments to Employment Agreements and Policies. Also, a strong communication plan will be needed to inform your team.
But for now – understanding the changes is the first step.
As these changes are worked through and more information comes available, we will keep you updated.
We are here assist with any questions and provide the support you need.
Positive People have over 30 years’ experience helping businesses make change and ensuring legislative compliance. If you need help for any HR matter, contact us now on 0800 00 00 49 or info@positivepeople.co.nz