Source: Radio New Zealand
Submissions have been received on the Employment Leave Bill, which is to replace the Holidays Act. 123RF
A new law that is intended to simplify New Zealand’s rules around leave has the potential to add complexity – and create difficulties particularly for people being paid commission, some legal experts say.
Submissions have been received on the Employment Leave Bill, which is to replace the Holidays Act.
It introduces changes such as annual and sick leave being accrued according to time worked, and a new “otherwise working day” test for public holidays.
But it also says that all leave taken will be paid at an hourly rate – and for those who are not on a set salary, the leave will be taken at the “lowest hourly rate payable for the day on which leave is taken”. Fixed allowances are included, but not things like commission.
Jim Roberts, a partner at Hesketh Henry, said this was potentially a big problem. “In its simplest form, holiday payments are going from being calculated on everything earned to being calculated on the lowest possible rate.”
Roberts said it would not affect people who did not usually get overtime or commission but could be very significant for those who did.
“There are salespeople who are set up on close to, or the minimum wage, as a retainer, and everything else is commission. Their annual holidays will be at minimum wage. There is no incentive whatsoever for those employees to ever take annual holidays. For example, an employee who earns 80 percent by commissions now gets holidays at paid 20 percent. Under the current [Act] they are 100 percent.
“The same applies to salaried and wage earners who work a lot of overtime. These are usually trades, other non-university based qualifications, and unqualified people working in large industry, manufacturing and labouring roles. The latter category, which is the largest, tend to be the lowest paid. They also tend to include people employed in 24/7 occupations, i.e. shift workers, for example at ports, hospitals, airports and any other operations that operate 24 hours a day every day of the year.
“It is the employees with low base rates supplemented with overtime or commissions who are set to lose the most. The overtime group was heavily unionised, which is how overtime payments were achieved in the first place. There is no impact whatsoever on an office-based worker working Monday to Friday on solely a salary.
“The workforce in the centre of towns and cities will be largely unaffected. There is a significant and disproportionate difference between these two groups. The former (overtime and commission employees) would take annual holidays with a significant loss of pay for that period. The latter (salary only employees) would take holidays with no loss of pay at all.”
Matt Harrop, special counsel at Duncan Cotterill, said it was an area that could still be tweaked.
People who were paid bonuses would also be affected, he said.
“For employees who have a large component of their pay that’s dealt with in bonuses, that’s going to be a big change.
“And that is actually for well-paid members of society more often than not. Those who work in the banking space, for example… there will be tweaks, I think, as to those very small aspects of it.”
He said the bill was trying to come up with the most simple system possible without undermining groups of people.
“There are arguments from certain employee groups and unions saying the setting is not right and it has a disproportionate effect on the most vulnerable groups in society because they tend to work the more variable patterns.
“But equally, you have some employers saying that doesn’t work for us as well. For example, when the horticulture and retail sector is saying the costs of having casual employment are going to go up and that doesn’t work.”
He said the calculation would have to change somehow to create a simpler system and that would have flow-on effects.
“It’s a question of do we want a simpler system with the associated effects or do we leave things in the broken state that they are? That’s the ultimate question, I think.
“The way modern work patterns are, there are a lot of inputs and there is a lot of variability. And that’s what the issue is when you lay this out into practical reality, is that people work complicated patterns.
“They have different amounts of pay they earn for different things. And systematising that in a way that can be rolled out at scale is not straightforward.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand