Holidays Act clarity urgently needed for businesses

Payroll provider FlexiTime is looking forward to the upcoming release of the findings from the latest Holidays Act taskforce review, saying clearer guidelines are needed from the government for New Zealand businesses.

The Holidays Act 2003 specifies employees are entitled to receive four weeks’ paid vacation for each year of employment. Confusion on how to interpret the Holidays Act has seen millions owed to employees in New Zealand, with prominent cases including District Health Boards owing $550-650 million to cover leave and shift allowance pay miscalculations, dating back to 2010.

In response to widespread Holidays Act non-compliance identified by the Ministry for Business, Innovation and Employment (MBIE), the Holidays Act Taskforce was established in May 2018 to review the Act and has since delivered their recommendations to the Minister for Workplace Relations and Safety.

New Zealand payroll provider, FlexiTime, says confusion hasn’t been limited to big organisations. FlexiTime has regularly answered questions from small-to-medium business enterprises (SMEs) on how to calculate leave, and has built an entire system that aims to get rid of the complexity for calculating leave.

CEO Rob Owen says the ambiguity stems from the lack of a clear definition of a working week in the law and has become problematic due to society’s changing nature of work patterns – particularly in industries with a higher number of variable hour staff and seasonal fluctuations, including hospitality and horticulture.

“The nature of work has changed over time and added complexity when it comes to calculating employee holidays. The Act is based on the outdated idea that all employees work 40 hours a week, Monday to Friday. With increasing numbers of employees working flexible hours, working out how much of the four week annual entitlement is used when an employee takes a day off is not as clear cut as it once was.

“Building a new payroll system from scratch over the past two years gave us a unique opportunity to reassess how we handle holidays. Armed with the latest guidance from MBIE we have developed PayHero to make it easy to comply with the Holidays Act,” says Owen.

PayHero stores leave balances in Weeks and reviews the employee’s recent work pattern to determine how many days of leave the employee has available.

Owen says the principle of leave for rest, health and wellbeing is still important today for all employees and small businesses want to get it right, but there is confusion around how to interpret the Act.

“There are many things in the Holidays Act that are fundamentally sound, however the most important outcome we are looking for is clarity and certainty for employers and employees when it comes to the Act so that employees receive their correct entitlements.”

“Most employers want to do the right thing. We regularly deal with small business enquiries around leave and the Holidays Act who want to be compliant,” says Owen.