By EMA Head of Advocacy and Strategy Alan McDonald

It’s hard to think of a piece of legislation that has needed reform for as long as the Holidays Act.

Successive governments have been aware of longstanding concerns over the Act among workers, employers and payroll providers alike and promised to fix the issues. But they have also largely failed to deliver any meaningful change.

Businesses have long been calling for the Holidays Act to be scrapped and rewritten, saying it’s too complicated and is costing businesses time and money. Unfortunately, the approach to addressing those issues has been largely to ignore the main problems and tinker with existing legislation, adding further complexity.

The main issue for many employers was how the Act calculates annual leave, public holidays, sick days, and bereavement leave.

With the rise of different styles of work, it was challenging to accurately figure out how much workers were owed.

The previous government had a go at reforming the legislation, and in March 2020, Cabinet endorsed in full the 22 recommendations for improvements to the Act made by a tripartite Holidays Act Taskforce. However, the draft bill was far too complicated and didn’t see the light of day.

Now, the coalition government is attempting to reform the legislation and an exposure draft on the Holidays Act Bill was released for targeted consultation in September.

The EMA was one of the organisations tapped to review the exposure draft and provide feedback. We’ve worked with select members of the EMA to make sure we canvassed a range of opinions across the business community.

We also recently tested out thinking with around 500 members on a webinar and they largely agreed with the direction of our approach as it provides something efficient and simple for employers to operate.

We have been under a non-disclosure agreement as we reviewed the draft, but we can reveal the broad direction of travel that the government plans to take.

The exposure draft has suggested an hours-based accrual system from day one for annual leave. The EMA strongly supports that approach to annual leave, possibly also using IRD earnings to calculate the total value of the leave.

But the current proposals then approach sick leave allocation on a days-based entitlement and a system for pro-rating part-time work under the draft.

The EMA and many of our members always opposed the blanket entitlement of 10 days’ sick leave to all staff as it has never made sense that someone working one shift a week gets 10 days’ sick leave while someone working five days a week gets the same. This change is also welcome.

However, taking the above approach means we still have two different ways of calculating different leave entitlements and the EMA and the members we worked with all preferred an hours-based accrual system across all types of leave, to avoid having different approaches.

That could also mean sick leave being accrued on an hours basis from day one, with a 10-day maximum for full-time staff. We’d also want to see a more disciplined approach around the uses and granting of medical certificates for sick leave and how the return-to-work process is managed.

Bereavement leave has been a difficult area for many employers to navigate, particularly due to the changing nature of the workforce and cultural needs. The exposure draft has suggested a broader definition of what constitutes a ‘close family member’.

We prefer a different approach where the law does not try to define what constitutes a close family member. Instead,  we think there should be a cap on days of bereavement leave, with some employer discretion in granting leave in difficult circumstances.

Once that cap is used up, it’s down to family and friends if they need to take leave, but that will be unpaid. After that time, leave can be taken unpaid at the discretion of the employer. But that is also an approach we will need to refine further in the next round of consultation on the new legislation draft.

In our submission on the exposure draft we have asked that other forms of leave be revisited.

New Zealand’s domestic violence leave law puts the onus on workplaces for paid support to staff affected by family violence. While take-up rates for domestic violent leave are very low – less than 1% – our view has always been that payment should sit within the welfare system rather than with employers.

In addition, we believe the hourly accrual system should help to iron out many issues that have come up around accruing leave while on paid parental leave, ACC or jury service. Under this simplified system, you accrue leave based on hours worked.

Unfortunately for those already struggling with the current Holidays Act, the impact of the EMA’s approach may be to slow down introduction of a new Act.

We understand that Ministry of Business, Innovation & Employment officials are already working on how to implement what is outlined in the exposure draft. But, in our view, that only solves half of the issues and we’ve recommended moving to hours-based accruals for all forms of leave – which is basically a fresh start to the complete Act, rather than a 50% fix.

Considering how long we have put up with this current problematic legislation, let’s get a new Holidays Act done once and done right.

Submissions on the exposure draft ended in early October and the EMA has presented its feedback. The next step will be the introduction of the new legislation for its first reading to the House by the end of the year or early 2025. Once this first public draft has passed through the house, it will go out for submissions and employers will also have an opportunity to appear before the select committee on the changes.

We anticipate the final legislation will be passed by mid-2025, with a 12- to18-month delay before implementation as new software will need to be written by payroll system suppliers and employers will need to upgrade their payroll systems.

We also want a grace period against prosecution of 12 to 18 months while employers bed in their new systems and smaller employers become fully aware of their new obligations and familiarise themselves with those new much simpler systems.