18 February 2003 Media Statement

Holidays Bill introduced to House

A new Holidays Bill has been introduced to the House in line with the key policy decisions announced by the Government in February last year, Labour Minister Margaret Wilson said today.

The Bill will receive its first reading next week and be referred to the Transport and Industrial Relations Select Committee.

Margaret Wilson said the new legislation would provide much needed certainty, clarity and consistency around holiday entitlements.

“Both employers and employees find the current Holidays Act outdated and difficult to understand. You just need to look at the number of complaints to Labour Inspectors and inquiries to the Employment Relations Service infoline to get an idea of the size of the problem.”

During 2002, 75 per cent of all complaints to the Labour Inspectorate were related to holidays. During the same period, 26 per cent of all enquiries to the Employment Relations Service infoline also related to holidays.

Margaret Wilson said the Bill reflects the work patterns of modern businesses and the diversity of the modern workforce.

“It also reflects case law that is in line with Government intention and treats all public holidays consistently.”

While the Bill retains the current provision of three weeks annual holidays, all employees who agree to work on any of the 11 statutory public holidays will receive payment at the rate of time and half for their work, she said. If an employee works on a public holiday that falls on a normal working day for them, they would also be entitled to an alternate day off.

“All public holidays will be treated the same way which means the payment and alternate day entitlements will now apply consistently to Waitangi and ANZAC Days.
“Changes to special leave entitlements ensure that employees have clear and separate entitlements to sick leave and to bereavement leave. The current minimum entitlement of five days for both sick and bereavement leave is grossly insufficient for the increasing number of employees who must balance work, parenting and caregiving responsibilities.

“The new Act will provide for five days sick and domestic leave with a separate entitlement to leave where an employee has suffered a bereavement.”

Margaret Wilson said the new Holidays legislation was the fourth in a series of government initiatives designed to modernise the workplace environment.

“It builds on the consultative provisions of the Employment Relations Act, amendments to the Health and Safety in Employment Act and the introduction of Paid Parental Leave.

“All the initiatives contribute to the development of more productive workplaces and recognise the importance of work-life balance,” Margaret Wilson said.

ENDS

Proposals contained in the Bill are outlined below.

Annual Holidays

1. An employee is entitled to three weeks annual holidays upon the completion of 12 months continuous employment. (N.B. the Progressive Coalition intends to move an amendment for four weeks annual leave).
This is the status quo.

2. An employer must give an employee the opportunity to take two weeks of their annual holidays in one uninterrupted period.
This is the status quo.

3. The entitlement to annual holidays remains in force until they are taken and the onus is on the employer to ensure that an employee takes annual holidays.
This is the status quo.

4. In the first instance, timing of annual holidays should be by agreement between an employer and an employee.
This is the status quo.

5. An employer who has one customary closedown period a year may require employees to take annual holidays at that time.
This represents the status quo, but the Bill clarifies that this applies to only one closedown per year and only where it is customary for the employer to do so.

6. The calculation of annual holiday pay in various circumstances is clarified.
This does not result in any reduction to annual holiday pay. However, an employer will no longer be required to recalculate annual holiday pay where an employee has taken holidays in advance. The change is made to reduce compliance costs.

The Bill spells out in detail how an employee’s holiday pay is to be calculated in situations where:
- Entitlement has arisen;
- Annual holidays are taken in advance;
- Employment ends within 12 months;
- Employment ends and entitlement has arisen;
- Employment ends before further entitlement has arisen;

7. “Pay as you go” annual holiday pay (where an employee receives a payment for annual holiday pay with each salary or wages payment) is permitted only where the employee’s employment agreement is for a period of less than 12 months, the employee agrees, and the holiday pay is an identifiable component of the wages.
This is consistent with the objective of annual leave, that an employee is entitled to holiday pay upon the completion of 12 months employment, and that paid annual holidays cannot be exchanged for cash. Under current case law, employees can be paid in this manner in some circumstances. This provision provides certainty to employers and employees and will reduce compliance costs and litigation.

Public Holidays

1. All employees receive 11 paid public holidays if they are days they normally work .
This is the status quo.

2. An employee is entitled to an alternative day if they work on a public holiday that is a day they would normally work.
This is the status quo.

3. An employee cannot be compelled to work on a public holiday unless it is a term of their employment agreement or they otherwise agree.
This is the status quo.

4. All employees must be paid rate and a half for working on a public holiday (an employment agreement cannot provide for a lower rate of pay).

This represents a new statutory minimum rate of payment for all employees who work on a public holiday. Where an employee’s current rate of pay incorporates a component for rate and a half payment based on your ordinary pay for working on a public holiday, this must be clarified so that the agreement complies with the Bill. This must occur when the agreement is next amended/renegotiated or within 12 months of the Act coming into force, whichever is earlier. What constitutes ordinary pay is clearly defined based on case law. This provision applies to both employees who earn salaries and employees who earn wages as in both situations there may have been previous agreement that the ordinary rate includes a component payment of at least rate and a half for working on a public holiday.

5. The separate provisions for rate of pay for working on a public holiday in “factories and undertakings” are removed.

The distinction between factories and undertakings and other types of employment is prehistoric and irrelevant in today’s environment. Under the Bill all workplaces will be treated the same.

6. Payment and alternative day entitlements for Waitangi and ANZAC Days are consistent with the other public holidays.

Currently an employee is only entitled to an alternative day for working on these days if they are paid ordinary rates of pay. For employees this has meant that they can be paid at a minimal level above their ordinary pay and no longer qualify for an alternative day. Both employers and employees have had to deal with two sets of rules for public holidays. For the purposes of clarity and certainty, all public holidays will now be treated consistently and an employee will be entitled to an alternative day if the day was a normal working day for them, regardless of the amount they are paid for the public holiday.

7. Where Christmas and New Year public holidays fall on or over a weekend, they are transferred based on the working week of the employee (i.e. transferred for employees who do not normally work on the weekend, and observed where they fall for employees who do normally work on the weekend).

Currently these holidays are automatically transferred where they fall on a weekend, unless the employment agreement provides otherwise. This can result in a situation where employees who work on the actual days but not the days to which they are transferred are penalised through losing an entitlement they already have. This provision dates from a period when weekend work was limited and has been modernised for purposes of both clarity and fairness

8. Where an employee is on call on a public holiday and is required to work, the employee is entitled to an alternative day in lieu, and rate and a half payment for the hours worked, regardless of whether the day is a normal working day for the employee.

Currently an employee would only be entitled to an alternative day where the day is a normal working day and there is no statutory minimum rate of payment for the day (outside of the minimum wage).

9. Where an employee is on call on a public holiday and not required to work, the employee is entitled to an alternative day if the restriction on the employee’s freedom of action is such that the employee cannot be said to have had a whole holiday.

This reflects case law. Inclusion in the legislation is designed to produce clarity and reduce litigation.

Sick and Bereavement Leave

1. An employee is entitled to sick leave and bereavement leave upon the completion of six months current continuous employment.
This is the status quo.

Currently an employee is entitlement to five days special leave per year (for sick, domestic and bereavement leave). There is currently no statutory provision for accumulation.

2. The entitlement to sick leave is five days per year. An employee is entitled to sick leave where they, their spouse , or someone who depends on them for care is sick or injured.

Up to 15 days sick leave may be carried over into the next period. Unused or accumulated sick leave is not paid out upon termination of employment.
An employee is entitled to:

- three days bereavement leave upon the death of an employee’s spouse/partner, parent, child, sibling, grandparent, grandchild or spouse/partner’s parent; and

- one day of bereavement leave on any other occasion where, in good faith, the employer accepts the employee has suffered a bereavement and taking into account relevant factors, including:

- the closeness of the association between the employee and the deceased person;

- whether the employee has to take significant responsibility for all or any of the arrangements for the ceremonies relating to the death; and

- any cultural responsibilities of the employee in relation to the death.

3. An employer cannot require proof of entitlement to sick leave unless the period of leave is longer than five consecutive days (whether or not the employee would have otherwise worked on all those days).
This clarifies an area that has caused dispute and litigation in the past because the Act was silent on the issue.

Enforcement

1. An employer is required to inform an employee of their entitlements under the Bill, and where they can access additional information (Department of Labour Employment Relations Service).
This introduces a positive requirement to provide information.

2. Minimum entitlements under the Bill can be enforced by an employee, their representative or union, an employer, or a Labour Inspector.
This is the status quo.

3. Only a Labour Inspector may initiate a penalty action.
This is the status quo.

4. The current level of penalties should be increased to a maximum of $5,000 for an individual and $10,000 for a company or corporation.
The current maximum penalty is $500. The Bill brings the penalties for breaches of holidays legislation in line with those under the Employment Relations Act 2000.

N.B. The Bill does not contain any provision for penalties for continuing offences.

Coverage

1. The provisions of the Bill apply to all employees, with the exception of the Defence Force.
Only parts of the current Holidays Act apply to the Crown.

2. The definition of “employee” is that of the Employment Relations Act and includes homeworkers.
This is the status quo.

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