Daze no more: Holidays Act 2003 set to receive a much needed revamp

The Government has officially accepted the Holidays Act Taskforce’s (Taskforce) recommendation to overhaul the Holidays Act 2003 (Act), a convoluted piece of legislation that has caused much grief and confusion over the years, with offenders the likes of McDonalds, the Police, and even the Ministry of Business, Innovation and Employment, the very Ministry responsible for overseeing the application of the Act.

After receiving a joint request for clarity from employers and unions, the Government put together the Taskforce to assess a way to make compliance easier for employers.

The Taskforce has made 22 recommendation. We note those of particular significance below:


Theme Recommendations
Payment for annual holidays and FBAPS leave (family violence, bereavement, alternative holidays, public holidays and sick leave)
  • The greater of the following should be paid for annual leave:
    • Ordinary leave pay (base rate plus any scheduled overtime, allowance, commission and incentive payments)
    • Average weekly pay for the last four or 13 weeks
    • Average weekly pay for the last 52 weeks.
  • Each day (or part-day) of other leave should be paid based on the greater of:
    • Ordinary leave pay
    • Average daily pay
Annual holidays entitlement
  • Annual holiday entitlement should remain 4 weeks and continue to be calculated in weeks/ portions of weeks.
  • Employees should have the ability to take leave in advance on a pro-rata basis rather than wait 12 months before being allowed to take annual leave.
  • Where an employee’s days and hours of work are set out in an employment document and these are an accurate reflection of the employee’s actual working pattern, these agreed days and hours should be used as the basis for determining leave entitlements and deductions.
  • The ‘parental leave override’ in the Parental Leave and Employment Protection Act 1987 should be removed, to address discrimination against parents who take time off to care for their young children.
  • The ability for employers to use pay-as-you-go (PAYG) for employees on fixed-term contracts of less than 12 months should be removed and a more detailed definition should be provided for when PAYG can be used because a work pattern is ‘intermittent or irregular’.
  • The following simplified definition of ‘gross earnings’ should be used for leave payment calculations: “an employee’s leave payment should reflect all cash payments received, except direct reimbursements for costs incurred”.
FBAPS entitlement
  • Eligible employees should be entitled to bereavement leave and family violence leave from the first day of employment and one day of sick leave from their first day of employment, with an additional day per month of employment until the full entitlement of five days is reached after four months.
  • Employees should have the ability to take sick leave and family violence leave in units of less than a day on a pro-rata basis, with a minimum amount of a quarter of a day.
  • A new, prescriptive, methodology should be used to determine whether a day is an otherwise working day for an employee. A day should be considered an otherwise working day for an employee if:
    • The employee was expected to work on the day in question according to a work pattern that has previously been agreed between the employee and employer (e.g. regular shift pattern in the employment agreement); or
    • The employee has worked 50% or more of the corresponding day in either the previous 4 or 13 weeks.
  • The list of people for whom bereavement leave applies should be extended to include a more modern understanding of family members to include:
    • Stepfamily
    • Family-by-marriage not already included (siblings or children-in-law)
    • Cultural family groups
    • Aunts, uncles, nieces and nephews
    • Miscarriage
  • Provisions relating to transferring public holidays should be amended so that the day that the public holiday is transferred to should automatically be treated as an otherwise working day to reduce the chance of employees being disadvantaged by the transfer.
  • Closedown provisions should be amended to provide greater transparency and certainty for employees. The requirement that holidays are paid out at 8% and an employee’s anniversary date is reset should be removed (although it should still be possible for anniversary dates to be reset by agreement).
  • On the sale and transfer of a business, employees should have a choice about whether to transfer all of their leave entitlements to the new employer or have them paid out and reset.
  • Employers should be required to provide payslips to employees every pay period.
  • Employers and employees should have the ability to agree to arrangements that differ to those in the Act, providing that it can be demonstrated that these arrangements provide the employee with leave entitlements that, at a minimum, meet the standards of the Act.

We can expect details of the new legislation to come to light in early 2022. Employers can be reassured they will be provided guidance well ahead of any changes actually taking place.

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