In 2003, New Zealand enacted the Holidays Act (2003) to outline leave entitlements for employees and create a healthier work-life balance. But since its establishment, many businesses have remained baffled by its complexity, the outcome of which has been punitive.

In 2016, after a labor inspector audit, the New Zealand police were forced to pay more than US$33 million to underpaid staff. In 2019, the district health boards announced they owed a staggering US$550- US$650 million due to errors in leave and shift allowance payments compiled since 2010.

The latest casualty of the Act? More than 1000 of Heinz-Wattie’s employees, dating back to 2011, are currently seeking remediation payment due to incorrect holiday leave pay.

Subsequently, a Holidays Act Taskforce was set up to iron out irregularities and provide greater clarity to employers and employees. Now that the government has approved all 22 recommendations, what exactly should you know about, and what does it mean for your company? The following are some noteworthy changes.

Woman working from home

Updates to the pay-as-you-go (PAYG) model

Much of the confusion around the Holidays Act is the definition of intermittent or irregular work and how it affects employee eligibility for annual holiday pay.

[bctt tweet=”Much of the confusion around the Holidays Act is the definition of intermittent or irregular work and how it affects employee eligibility for annual holiday pay.” username=”globalpeo”]

New guidelines state that there will be a clearer definition of what “intermittent or irregular” means. Employers will not be able to pay PAYG for employees on a fixed-term contract of less than 12 months. PAYG employees will also need to be reviewed every 13 weeks for eligibility for PAYG.

Greater flexibility for FBAPS eligibility

Family violence, bereavement, alternative days, public holidays, and sick leave (FBAPS) eligibility are expected to be altered.

Instead of completing six continuous months of employment, employees will soon be eligible for FBAPS days from their first day of work. As a part of their eligibility, professionals will get three days of additional bereavement leave to cover other family members, accommodating more “modern family structures.”

Sick leave will also be immediately available to all employees from their first day at the job, together with an additional day per month until the full five-day entitlement is reached. Furthermore, the committee is considering implementing legislation that ups the current sick leave days from five to 10 days per year.

Reduce discrimination against parental leave

There will be a change to how annual leave is calculated for new parents who have returned from parental leave. Currently, this is calculated using average weekly earnings for 12 months following their return to work. To make this fairer, annual leave will be calculated using the “greater of” method.

Advanced annual holiday leave

Currently, employees are only entitled to four weeks of holiday leave after hitting 12 months of continuous employment. According to suggested improvements, they will be able to take annual holidays within the first 12 months of employment, up to the amount they would be eligible for on a pro rata basis.

How can companies prepare for the upcoming improvements?

The New Zealand government expects to introduce legislation by 2022, and this gives businesses that employ in, operate in or are based in New Zealand, adequate time to adhere and implement the new guidelines. But how prepared are you?

Firstly, organizations will need to ensure these new requirements are reflected correctly in employment agreements, policies, and payroll processes.

In a bid to improve transparency and clarity on leave entitlements, pay slips will be required for each pay period. In addition, they must detail used and remaining leave entitlements and how these were calculated.

The need for proper bookkeeping has risen, and relying on paper-based processes doesn’t cut it anymore. These outdated methods make collating data cumbersome, and security is not guaranteed, with paper records running a higher risk of misplacement.

Companies must begin embracing technology and start adopting cloud-based platforms. For New Zealand companies and employers that want to keep payroll operations in-house, payroll administrators must undergo payroll training courses at the very least.

But employing an efficient cloud-based platform like KeyPay will enable employers to streamline data and replace the manual input of time and pay rate calculations. With timesheets and rostering integrated directly into payroll, employee data remains up to date to ensure leaves and entitlements are calculated correctly. KeyPay will also be able to accurately calculate and apply annual holidays in advance and display leave balances clearly on payslips.

Companies must remain compliant during international expansion

Unlocking the capacity to hire cost-effective and borderless talent is tempting. But businesses must remain vigilant of the newly amended Holidays Act when looking to set up international teams in New Zealand.

The help of an Employer of Record like Globalization Partners can simplify global remote team building by making it easy for companies to hire anyone, anywhere, within minutes, and without setting up subsidiaries. A legally compliant SaaS Employer of Record platform and world-class customer support team can help you move quicker than your competition.


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