Holidays Act Changes Announced

Employees will be able to exchange up to one week’s annual holidays for cash from next year, Minister of Labour Kate Wilkinson says.

The change is among a number of planned amendments to the Holidays Act 2003 announced today.

“Employees have been telling me they would like more choice,” says Ms Wilkinson.

“They are keen to exchange some of their holidays for extra cash and I’m pleased to say they will be able to do so as of next year.

“Only employees can make this request and I know from the feedback I have received many will be shoulder-tapping their employers asking for the exchange as soon as they can.”

Ms Wilkinson says employers won’t be able to pressure employees to exchange holidays for cash, though they can decline any request. The value of the cashed-up holidays will be the same as it would be if the employee took the holidays.

Other proposed changes to the Act include:

• For those whose hours of work and pay are irregular, their payment for sick leave, bereavement leave, public holidays and alternative holidays will be calculated by averaging gross earnings for the preceding 52 weeks or whatever lesser period the employee has been with that employer;

• Employers and employees will be able to agree to transfer the observance of public holidays to another (identified) working day;

• Employers will be able to ask for proof of sickness or injury within three consecutive days of an employee taking sick leave, but will have to cover the employee’s reasonable costs in obtaining proof; and

• The maximum penalties for non-compliance with the Holidays Act will double from $5,000 to $10,000 if the employer is an individual, and from $10,000 to $20,000 if the employer is a company or other body corporate.

There will be no change to holiday and leave entitlements.

Ms Wilkinson says the proposed changes will make the Act easier for businesses and employees to understand and apply.

“These changes are aimed at reducing direct costs and compliance costs so businesses can invest their time and money in growing their business and creating more jobs.”

A Bill amending the Holidays Act 2003 is being drafted for introduction later this year and is aimed to be implemented in July 2011.

Questions and answers:

How will I go about cashing up holidays?

You will have to ask your employer in writing and your employer will have to reply in writing. You and your employer may agree on a process in your employment agreement.

Will I have to give a reason for asking to cash up holidays?

No.

Will my employer have to give a reason for declining?

No.

How will I know whether an employer will allow me to cash up annual holidays?

Individual employers will be able to have a policy as to whether or not they allow holidays to be cashed up. It is their decision to approve or decline each request.

Will the employer’s cash up policy have to apply to everyone at the workplace?

No. Employers will be able to apply the policy to all or part of their workplace, to suit their business needs.

Will my employer be able to encourage or pressure me to cash up holidays?

No. It can only be done at your request.

What will happen if I and my employer dispute the value of cashed up holidays and/or the amount of holidays I have cashed up?

Labour Inspectors can determine this for you.

What happens if my employer pressures me to cash up annual holidays?

If the Employment Relations Authority or a Labour Inspector finds that this has happened, those holidays will be returned to your holiday balance and you won’t have to repay the holiday payment.

How much holidays will I be able to cash up?

You will be able to cash up a maximum of one week’s annual holidays each entitlement year. That may be for a full week at one time or you may wish to spread it out and make more than one request during an entitlement year.

Can the exchange be discussed in salary negotiations or as a condition of employment?

No.

When will my employer have to pay me the cashed up annual holidays?

As soon as practicable after your employer has agreed to your request. Typically this would be on your next payday, provided your employer grants the request in time for the next pay period.

How much will cashed up holidays be worth?

Cashed up holidays will have the same value as if you took the holiday – that is, the higher of your ordinary weekly pay at the time of payment for the cashed-up holidays or your average weekly earnings in the previous 12 months.

Will I be able to cash up annual holidays I became entitled to while on parental leave?

Yes. The value of the payment will depend on when your entitlement to annual holidays arose.

Are there any plans to change annual holiday and leave entitlements?

No.

How is the calculation of Relevant Daily Pay changing?

There will be no change for salaried employees and those on regular hours and pay. For employees whose pay and hours are irregular, the calculation will be based on an average of their gross earnings over 52 weeks or whatever lesser period of employment they have had with that employer.

Why is the change to Relevant Daily Pay required?

The current law is complicated and provides incentives to game the system. Businesses have struggled to correctly apply the law and this change will provide greater certainty and support productivity.

Who has ultimate say on when an alternative holiday can be taken?

If agreement can’t be reached, employers will be able to decide when it will be taken.

Will the observance of public holidays be able to be transferred?

Yes. Employers and employees will be able to agree to transfer the observance of public holidays to another (identified) working day. This change better reflects that New Zealand is a multi-cultural society and some employees may prefer to work a current public holiday in exchange for being granted a day off on a day that has special significance to their culture or religion that would otherwise be a normal working day.

Can employers now request proof of sickness or injury within three consecutive days of an employee taking sick leave?

Yes, if the employer suspects someone is pulling a ‘sickie’ they can ask for proof of illness or injury. The employer will have to cover the employee’s reasonable costs in obtaining this proof (pay doctor. Current law stipulates that employers must first have ‘reasonable grounds’ to question whether sick leave being taken isn’t genuine before asking for a medical certificate.

Why are penalties increasing for breaches of the Holidays Act?

The penalties will double from $5,000 to $10,000 if the employer is an individual and from $10,000 to $20,000 if the employer is a company or other body corporate. These penalties haven’t been amended for a number of years and the deterrent value of the average penalty handed down has been eroded. The increases underline the Government’s view that it is important employers meet their legal obligations.

ENDS

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