The government has recently introduced the Leave Entitlements Bill to Parliament, which is proposed to replace the Holidays Act.

This follows an earlier announcement of changes coming to the current leave entitlements which employees have in New Zealand. You can read our article on that here.

What is changing?

If the Bill passes into law, the following key changes will be made.

Annual leave

Employees will accrue annual leave at a rate of 0.0769 hours per hour worked. Annual leave will begin to accrue from day one of a person’s employment. This equates to four weeks of annual leave per year for an employee working 40 hours per week.

Currently, an employee is entitled to four weeks of annual leave per year. This entitlement begins after an employee has worked for an employer continuously for a year.

Whilst this change may not affect full-time employees, it will reduce a part-time employee’s annual leave entitlement to reflect the number of hours they work.

Sick leave

Employees will accrue sick leave at a rate of 0.0385 hours per hour worked. Like annual leave, sick leave will begin to accrue from day one of a person’s employment, but will be capped at 160 hours (20 eight-hour days).

This would not impact full-time employees as this rate of accrual is the equivalent of 10 days of sick leave per year. This change will, however, impact part-time employees, whose sick leave entitlements will reflect their hours worked.

Types of hours and Leave Compensation Payment

The bill introduces three new types of hours for employees:

• Standard hours – hours which the employer requires the employee to work, and must pay them for.
• Additional hours – extra hours which an employee works beyond their standard hours, if their employment agreement provides for additional payment (i.e. picking up extra shifts or if there are provisions for paid overtime).
• Casual hours – hours which an employee works where their employment agreement does not require their employer to offer any work and does not require them to accept any work offered.

These different types of hours determine how leave is accrued. Annual and sick leave will only accrue on standard hours worked.

A Leave Compensation Payment of 12.5% of an employee’s ordinary hourly rate will be paid on all additional and casual hours worked instead of annual and sick leave accruing. This will replace what is known as pay-as-you-go, where in certain circumstances an employee receives 8% of their gross earnings in addition to their pay in substitution of their annual leave entitlements.

Bereavement leave and family violence leave

Both bereavement leave and family violence leave will remain as the same day-based entitlements, although these can be taken as whole or part days. They will also be available from day one of a person’s employment.

Parental leave

Parents who have taken parental leave will receive their normal rate of pay for leave when taking annual leave. Currently, annual leave payment rates in the year following parental leave are subject to an override, which calculates the rate as the average weekly earnings from the previous 12 months (which is often a lower rate than their ordinary pay).

Working on a Public Holiday

If an employee works on a public holiday, they will be entitled to time-and-a-half for the hours worked, and paid leave for any other hours they would have normally worked if it was not a public holiday.

Instead of receiving a full day of alternative leave in addition to time-and-a-half, employees will now accrue one hour of alternative leave for every hour which they work on a public holiday.

Payslips

Employers will be required to provide employees a pay statement every pay period. This will need to detail the amount paid to an employee itemised by category, for example, an employee’s ordinary rate, leave compensation payment, and any different types of leave taken.

Importantly, employers must not include details of any family violence leave taken in pay statements, and this must instead be recorded as a non-identifiable component of their pay.

Currently, employers are not required to provide employees with a pay statement unless they request information on their pay and leave.

When will the changes come into force?

The Bill has not yet passed through Parliament and come into force. The government has indicated that it wishes to pass this bill before the election. If it passes into law, the changes will come into force two years later. For the schooling sector, the changes will come into force 10 years after the bill becomes law.

While there is time to adjust to the changes, it is important to understand how your obligations as an employer will change if this bill becomes law. If there is confusion about an employee’s entitlements, it pays to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.