Source: EMA
The Government’s announcement to repeal and replace the Holidays Act is a long-overdue fix to a system that has caused confusion and cost for both employers and employees, says the Employers and Manufacturers Association (EMA).
Alan McDonald, Head of Advocacy and Strategy at the EMA, says the new Employment Leave Act will bring much-needed clarity and simplicity to leave entitlements.
“Our first submission on the Act dates back to 2017, so it’s great to finally see a government follow through with a system based on simplicity,” he says.
“Employers and employees should be able to more easily understand and apply the rules and that’s a win for everyone. Small to medium-sized businesses should welcome the changes as it brings clear calculations with few other considerations being required.”
The EMA says the shift to an hours-based accrual system for annual and sick leave is a practical and fair solution, particularly for part-time and casual workers. The introduction of pro-rata sick leave more fairly reflects a sick leave entitlement between full-time and casual/part-time workers who all currently get 10 days sick leave regardless of how few hours they work.
The increase in the Leave Compensation Payment (LCP) entitlement helps offset that change for part-timers and better reflects actual hours worked. It also reduces the leave entitlement employers have to carry on their books.
“The current system has led to many millions in remediation payments across both the public and private sectors. This reform will help prevent those liabilities in future,” says McDonald.
“It’s also fairer. Under the current rules, someone working one shift a week could receive the same sick leave entitlement as someone working full-time. That imbalance needed to be addressed.”
The EMA also supports the move to allow leave to be taken in hours rather than full days, and the ability for employees to cash up a greater portion of their annual leave balance. Under the proposed changes, employees would be able to cash out up to 25% of their unused annual leave at each 12-month anniversary of their employment.
McDonald adds that these changes reflect the realities of modern work and give both employers and employees more flexibility.
The EMA notes that while some changes, such as the treatment of parental leave and the LCP for casual workers, may result in minor cost increases for employers, these are balanced by savings from simplified administration and fairer leave calculations.
“Overall, this is cost neutral for most employers, and the time saved from not having to navigate a convoluted system is a major win,” says McDonald.
The EMA also says the 24-month implementation period is pragmatic, allowing businesses and payroll providers time to rewrite software, adjust systems and manage the transition.
“There’s still work to be done on the transition arrangements, particularly for employees with existing leave balances, but this is a strong start,” he says. “We commend the Minister and her team for tackling a long-standing issue and delivering a solution that’s clear and workable.”
Workplace Relations and Safety Minister Brooke van Velden made her announcement on the reform of the Holidays Act at a forum today for EMA members. The event was sponsored by Smartly, the Kiwi-made payroll and people management software that helps thousands of small to medium-sized businesses pay their people simply and compliantly.
