insight

Holidays Act improvements coming in 2022

03 March 2022

The Holidays Act Taskforce recommended an overhaul to the Holidays Act which is designed to make the Act clearer for both employers and employees. The recommendations have been accepted by the Government and legislation is likely to be introduced this year to affect them.

Key changes include:

  • Payslips to be required for all employees
  • Clearer formulas to be used to calculate annual leave and FBAPS1 leave (including the new concept of ‘ordinary leave pay’ and a 13 week average calculation)
  • Gross earnings to include “all cash payments received, except direct reimbursements for costs incurred” clarifying that all bonus and incentive payments will be included in leave calculations
  • Contracted, rostered or average hours to be used to determine the amount of annual leave which constitutes an employee’s four week entitlement
  • Sick and family violence leave to be available in part days
  • Bereavement leave and family violence leave entitlements to apply from the first day of employment
  • Sick leave to accrue from the first day of employment
  • Three days’ bereavement leave to be extended to step families, in-laws, whangai relationships, aunts, uncles, nieces, nephews and miscarriage
  • A clearer formula based on a 13 week average to be used to determine whether a day is otherwise a working day to determine public holiday entitlements
  • Stricter rules around pay as you go holiday pay (including removing ability to use pay as you go for fixed terms of less than 12 months) and annual closedowns, and
  • Annual leave accrued during parental leave to be paid at the full rate.

We are concerned that the changes do not adequately meet the taskforce’s mandate of providing clarity on the Holidays Act, and that any new legislation will continue to be difficult to interpret (most notably, the methods of calculating payment for annual leave and FBAPS). The recommendations will also result in enhanced entitlements for employees and increased costs for employers.

The Government intends to pass this legislation prior to the next election and employers should be considering how these changes will impact the way they manage leave and their payroll costs in the near future.  

1. Family violence leave, bereavement, alternative leave, public holidays and sick leave.