The Holidays Act is changing – but you’ll need to comply in the meantime

A major overhaul of the Holidays Act 2003 is underway, which is welcome news because this is a notoriously tricky Act for businesses to comply with.

Many businesses have been caught out over the years, including Bunnings, NZ Post and McDonalds. Even the NZ Police, several local councils and MBIE have found themselves with big wage bills to pay after unintentionally underpaying staff for holidays.

The new legislation is designed to make it simpler for businesses to correctly calculate holiday pay, and it looks set to be introduced in early 2022. In the meantime, though, you’ll still need to comply with the existing Act.

Keep accurate and up-to-date records

You don’t want to underpay or overpay your staff members, so it’s important to keep accurate records of when they work. This includes:

• Records of the hours each person has worked and what they were paid for those hours

• Annual leave accrued and taken

• Sick leave and bereavement leave taken

• Any public holidays worked and what was paid for those hours

• Keep all your records up to date.

Workers may also be entitled to domestic violence leave or parental leave, and they can apply for unpaid leave.

Tools and guidance

You can use the Holiday Tool from Employment New Zealand to help you work out what to pay someone when they are on leave. You can also read more tips for compliance here.

Sick leave entitlements are changing

From 24 July 2021 all eligible employees' minimum annual sick leave entitlement of five days increases to 10 days.

What you need to know:

• The changes will roll out gradually, with employees gaining the extra five days when they reach their next entitlement day. This will either be after 6 months of employment or on their sick leave anniversary (12 months after they were last entitled to sick leave).

• If your business already gives your employees 10 or more sick days per year, we recommend checking your sick leave policies and employee agreements to see if any changes need to be made. It’s always a good idea to seek some advice if you’re not sure about anything, we would suggest contacting MBIE in the first instance.

• The maximum amount of unused sick leave that an employee is entitled to remains at 20 days in any year, under the Act.

It's important for employers to understand and comply with their obligations under the Holidays Act 2003 (New Zealand Legislation website), including those related to correctly calculating employee leave entitlements and payments for annual holidays.

If you are a Xero or Smart Payroll customer, the software will automatically update so that your team will receive their correct entitlements.

For more information about leave entitlements and calculations see Employment NZ's website and Xero support: Review and update employee’s sick leave entitlement or Smart Payroll support