Proposed Changes to the Holidays Act 2003
Increasing certainty and reducing complexity
For years, employers have been calling for changes to the Holidays Act 2003 to address its complexities and uncertainties. The good news is that significant reforms are on the horizon that promise to address long-standing issues. Unfortunately, we still have a long way to go before these changes are implemented.
The Government has announced that an exposure draft of a Bill to reform the Holidays Act will be released for targeted consultation in September 2024. This draft will provide a preliminary view of the proposed changes and allow for public input before the Bill is formally introduced to Parliament.
Holidays Act – A Timeline and Possible Changes:
The draft Bill aims to simplify leave calculations and reduce costs for employers. Here is a glimpse of what the proposed changes might look like:
Annual Leave Accrual:
Transitioning from an entitlement-based system to an accrual based system.
Accruing four weeks of annual leave from their first day of work, at a rate of 0.0768 weeks per week, irrespective of hours worked.
Accrual will continue during other periods of leave (e.g., unpaid leave, sick leave, bereavement leave)
Simplified Leave Calculations:
The new methods will not require payroll systems to rely on data about an employee’s daily hours of work.
Calculations will be based on guaranteed hours and the average hours worked over a specified period.
13 Week Reference Period:
A 13 week period would be used to calculate “average weekly pay” for annual leave calculations.
Pay as You Go Criteria: Establishing clear criteria for using pay as you go for annual leave, with payments to be based on the greater of:
ordinary weekly pay (excluding variable components);
quarterly average weekly Earnings (AWE);
or Yearly AWE.
FBAPS (Family Violence, Bereavement, Parental and Sick Leave):
Introducing a new sick leave structure: 2 days on commencement, 4 days after 3 months, 4 days after 6 months, and an additional 10 days the following 12 months.
Sick leave will be prorated based on actual work patterns,
Part day FBAPS leave will be permitted.
Immediate access to family violence and bereavement leave
A new calculation method of leave based on base wages/salary > + fixed allowance > + an average of productivity and incentive payments > + cash value of board lodgings
Timeline for Changes:
September 2024: Exposure draft released for consultation.
December 2024: Cabinet update
First half of 2025: New bill introduced
18 month implementation with proposed changes expected to take effect in 2027
Employer Obligations
Until changes to the Holidays Act go through the parliamentary process and come into force, all existing legislation remains in place. Employers must continue to comply with the current Holidays Act and ensure they are providing the correct entitlements and payment to employees.
We will keep you informed of any changes.