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Holidays Act changes? Unnecessary - by Lawrence Anderson



How difficult the Holidays Act 2003 is to follow for employers, and changes that should be made to it, is a recurring topic in the media. I do not agree that it is as difficult as complained about.


Back in 2019 our last government set up a task force to look at overhauling or improving the Act. My prediction was that nothing will happen because the methods of calculation are sane. So far I am right.



The said article referred to “Payments to staff under the Holidays Act have been a big source of cost and confusion for years”. In my experience as an employment advocate I find that employers and their representatives, including lawyers, become confused because they do not spend any time to read the Act and apply it properly. Often there is little thought, and I am told that “the Accountants are right, [just because]”, and “the payroll software is right, [just because]”.


As I have observed in fighting with employers and their lawyers over entitlement calculation issues, the over-reliance of mainstream payroll software that does not use the Holidays Act’s methods of calculation, amplified with human error in implementing the software will inevitably lead to errors in wages entitlements.


Notably, it is all too common that where I am reviewing the wages/time/holiday records for an employee client that I will find that the employer has failed to record time records. Under s 130(1)(g) of the Employment Relations Act 2000, this information must be recorded: “the number of hours worked each day in a pay period and the pay for those hours”. For these systems to work it starts with the system of recording the information properly. Where there is smoke, there is fire.


In the recent Stuff news article, the Minister for Workplace Relations suggests the implementation of an accrual and pro-rata system where an employee would not be required to wait the current length of periods for entitlements to arise. The Minister then went on to complain of various inconsequential scenarios comparing employee entitlements based on the number of days and hours worked, including the proposition that a person with two part time jobs has entitlement to 20 days sick leave per entitlement period. What I then found alarming was that the Minister concluded in her arguments that:


“… And then you have the person who works two hours a day, five days a week and is also entitled to 10 days sick leave. At the moment, the Holidays Act refers to sick leave in days, not hours, with no clarification on what constitutes a day or how sick leave should be paid in a case like this.



The Act prescribes methods of calculating entitlements including sick leave. In the scenario the Minister complains of, for sick leave, under s 71 it is based on the Relevant Daily Pay, and if that is not able to be determined, the employer can use the Average Daily Pay calculation under the Act ss 9 and 9A.


Another example where the Act uses math is for the purposes of calculating Ordinary Weekly Pay if it is not possible to determine from the employment agreement. In some cases the Average Weekly Pay may be calculated if that is the greater amount for the purposes of calculation of entitlements, for example s 24, calculation of holiday pay if employment ends and entitlement has arisen.


These calculations are to be undertaken in accordance with the Act in many employment relationships that involve some complexity in the working hours and nature of the employment relationship. For example, where there are irregular or fluctuating hours of work, and payments that are to be treated as gross earnings for the purposes of s 14 of the Act which are part of the employee’s regular pay, this being over and above ordinary wage time (e.g. allowances, productivity/incentive-based payments, commission, payments for overtime, payments for board of lodgings).


For an employee that works in an office and is paid on the basis of ordinary time only, and no more, than 37.5 hours per week excluding breaks, it is easy to comprehend that one day of Relevant Daily Pay is based on 7.5 hours; Ordinary Weekly Pay is based on 37.5 hours. But throw other elements of gross earnings into the mix that are part of the employee’s regular pay, the Act has the provisions for calculation that should be easy enough to calculate, I would have thought.


It is time the commentators who are weighing in on their arguments against the current Holidays Act learn to read and apply math, particularly given that the Holidays Act Taskforce Final Report of October 2019’s recommendations include retaining the current formulae of calculations, and sought to add further calculations on top of what is already contained within the Act.


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