A perpetual holiday for the Holidays Act 2003? That could be the outcome of a just announced review. The review will involve representatives from both the business community and the union movement, and be chaired by Gordon Anderson, who is a well-respected professor of employment law.
The myriad number of problems that have arisen under the Act are largely due to the varying types of work patterns worked by employees. Many industries do not operate in a standard “9 to 5” environment which is the basis of the Act. This has meant the Act has not really kept pace with how work is actually performed. Employers have also found that their payroll systems were just not equipped to deal with their particular complex workforces.
For the last couple of years, the Labour Inspectorate has been undertaking a comprehensive programme of audits of holiday entitlements of some of NZ’s largest companies. The Labour Inspectorate has been attempting through its audits to recover arrears where payments have been less than legally required. Even government departments have not been able to get calculations right – so it is no surprise that smaller businesses have struggled with the Act.
But irrespective of some employers getting it wrong both on a small and large scale, it is clear that the Act is no longer fit for purpose, and it will need to change to address the complex working arrangements that now exist in practice. We welcome the review.
The review primarily is going to look at more logical ways to calculate payments for all forms of holiday and leave entitlements. The aim of the review is to simplify the calculations, but at the same time preserve entitlements that employees have (4 weeks’ paid annual holidays, 11 public holidays, five days’ paid sick leave and three or one day of paid bereavement leave).
We are told the endpoint of the review is that these simplified calculations can be “readily implemented” in a payroll system. We hope that is the case.
The review report will be out within 12 months with recommendations for “clearer and transparent rules” for payments, but the government has said that a “new regime” is likely to be two to three years away. It is highly likely this will mean a new piece of legislation will be put in place sometime within that two to three year period.
But in the meantime it is business as usual. The review is not going to look at fixing historical underpayments. Employers still have an obligation to pay employees based on the entitlements still in place now under the Act. If employers have not been paying correctly over the years, this liability is not going to go away.
It also means employers do not have to overhaul their payroll systems – at least not just yet. At some point in the near future employers are going to have to look at their payroll systems to see whether they are compatible with any new regime.
Finally, it also does not affect the ongoing Labour Inspectorate audits. These audits seem like they still have a long while to run yet, and inevitably some cases will end up in the courts.
We will provide you with updates through the review process, and any subsequent legislation process that follows. If you want to provide a submission to the review we are able to assist. And if you find you are the subject of one of these Labour Inspectorate audits we are able to assist you as well.