Regulatory Impact Statement - Review of the Holidays Act 2003
Appendix One: Assessment of Policy Options for the Holidays Act 2003
- This appendix is an assessment of the policy options
considered for the Holidays Act 2003. The assessment is based on the impact
on:
- understandability
- direct and compliance costs
- applicability to a range of employment patterns, and
- existing entitlements.
A. Cashing up annual holidays
Background
- Employees are entitled to a minimum of four weeks' annual holidays after each 12 months of service. Employees and employers are currently unable to agree to exchange any of the minimum entitlement for cash. They are able to reach agreement to cash up any annual holiday entitlements provided above the minimum of four weeks.
- According to the Survey of Working Life, 65.5 percent of employees were entitled to four weeks' paid annual holidays in their main job and 14.9 percent were entitled to more than four weeks[17].
Issues
- Submitters were split on this issue, though the majority supported allowing cashing up, providing that there were adequate protections for employees and employers and depending on the design criteria.
- Issues raised by submitters about not being able to cash
up annual holidays included:
- the inability of employees to cash up holidays if they have financial difficulties
- it is difficult to take four weeks off work, and
- high annual holiday accumulations can create high financial liabilities for employers.
- Issues raised by submitters about allowing the cashing up
of annual holidays included:
- it is contrary to the intent of the Act and reduces opportunities for rest and recreation
- it may increase inequities for women and for low paid workers, and
- it may erode entitlements to holidays and pay over time.
- The Department's 2009
research[18] found that:
- The accumulation of annual holidays was not considered a problem by employers in the research as they tended to either actively manage annual holidays or did not object to it accumulating.
- Many employers were interested in employees having the option to cash up a week's annual holidays because it would address difficulties with providing cover for staff on holidays.
- Employees were generally interested in having the option to cash up annual holidays, as long as it was at the employee's request.
Group's recommendations
- The Group has split recommendations on the cashing up of annual holidays. The union representatives strongly oppose allowing the cashing up of annual holidays because they are concerned about the potential negative impact on disadvantaged workers and that it will reduce entitlements to holidays and pay over time. The employer representatives support cashing up, but consider that employers should be aware of potential issues arising from agreeing to cash up holidays. The employer representatives made recommendations on their preferred design features.
Options for cashing up annual holidays
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
|---|---|---|---|---|
| 1. Status quo |
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Employees:
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| 2. Allow employees to request to cash up some of their minimum entitlement to annual holidays |
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Employees:
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Design of cashing up annual holidays
- If the cashing up of annual holidays proceeds then it
needs to provide a balance between opportunities for rest and recreation,
protections for workers, employee choice and fairness for employees and
employers. The Department of Labour suggests the following guiding principles
are used to shape the design of cashing up annual holidays:
- Employees continue to have adequate opportunities for rest and recreation each year.
- Only employees can request to cash up annual holidays, and it cannot be raised as part of wage/salary negotiations.
- Employers and employees have a choice about whether to cash up annual holidays.
- Cashing up annual holidays is not an alternative to good management of holidays by employers.
- The rules around cashing up of annual holidays are easy to understand and administer.
- There are low compliance costs.
- The key design features for cashing up annual holidays are in the table below. The employer representatives' recommended features are marked by a "*".
Design features of cashing up annual holidays
| Design feature | Option | Benefits | Disadvantages/Costs |
|---|---|---|---|
| Type of holidays to be cashed up | Accrued and entitled annual holidays |
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| Only entitled annual holidays* |
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| Amount of holidays that can be cashed up | One full week a year[20] |
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| Up to one week a year |
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| Any amount providing there is a minimum balance of three weeks' entitlement after cash up* |
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| Protections | - Request to cash up must be initiated by the employee* - They can request for any reason* - Request must be in writing* - A new request made each time holidays are cashed up |
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| - Employers must consider the request within a reasonable time period* - Advise the employee in writing whether they agree or refuse request* - Can refuse for any lawful reason* |
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| Cashing up cannot be raised in salary negotiations* or be a condition of employment |
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| Include process for cashing up annual holidays in employment agreements (but unable to include requests to cash up) |
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| Value of cashed up holidays | Same rate as what employee would have received had they taken the holidays away from work* |
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| Timing of payment | As soon as practicable* |
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Limited ability for employees to request to cash up annual holidays
- Based on submissions, there are likely to be some employers who do not wish to or will be unable to agree to employees' requests to cash up annual holidays. For instance, the employer may have an annual closedown period and wish to ensure employees have enough holidays to cover this period or they may operate in an industry where four weeks' holidays away from work is desirable for health and safety reasons. If employees have a general ability to request to cash up, employers would have to consider all requests they receive even though they may have no intention to ever agree to the request. They will be unable to have a blanket "no cash up" workplace policy. This may increase employment relationship problems if an employer does not agree to an employee's request to cash up. For instance, if the employee considers that the employer has not given due consideration to their request.
- Better outcomes may be achieved if employers can inform employees that the employer has a "no cash up" policy. An employer may have a "no cash up" policy covering the whole business, or some parts of its business but not others.
- If employees have a limited ability to request to cash up, employers should advise employees before they accept an offer of employment that the employer has a "no cash up" policy, which may be set out in the employment agreement. The employee would be unable to then make a cash up request at a later date, unless the employer changes their policy. For existing employees, the Department of Labour expects that employers would consult with their employees in the development of any policies on cashing up annual holidays in good faith.
- Allowing employers to not have to consider requests to cash up through the use of workplace policies may be seen as not being in line with the good faith requirements on employers and employees. However, this is balanced by ensuring that employers are upfront with employees about their position on cashing up annual holidays.
- This option should also limit compliance costs for businesses that are never able to or wish to agree to cashing up annual holidays, as they will not have to consider requests they would never agree to. However, it may make the provision harder for employers and employees to understand and may increase employment relationship problems if it is not correctly implemented and followed.
Other issues
- The Department of Labour is concerned that some employees and employers may not be aware of all of the implications of cashing up annual holidays, such as the impact on KiwiSaver and other superannuation contributions, income tax and social assistance payments. If cashing up of annual holidays goes ahead, the Department will provide information on these areas as part of its promotional work around changes to the legislation and ongoing guidance.
- The employer and employee representatives on the Group were split as to whether the value of cashed up annual holidays should be included in gross earnings. The Department considers that the payment for cashed up annual holidays should not be included in gross earnings. If it is included in gross earnings, employees who cash up annual holidays will receive higher payments for holidays and leave than employees who do not cash up. The design of cashing up annual holidays may then create a financial incentive for cashing up annual holidays over not cashing up annual holidays.
B. Relevant daily pay
Background
- Relevant daily pay (RDP) is used to calculate the payment of sick and bereavement leave and public and alternative holidays. The policy intent of RDP is to ensure that employees are no worse off financially than if they had worked on the day. RDP is what the employee would have received for working on the day (inclusive of overtime and incentive payments that would have been received had they worked) (RDP1). If it is not certain what the employee would have received on the day, then there is an averaging formula based on gross earnings for the last four weeks (RDP2). Employers and employees are able to provide for an alternative rate of RDP in their employment agreement, providing it is equal to or greater than RDP1 and RDP2.
Issues
- RDP is relatively straightforward for the majority of employers and employees.[21] Where employees have complex work arrangements (e.g. payments by commission or productivity or variable hours/days of work) it can be harder to know whether RDP2 should be used and to determine what components make up the gross earnings component of RDP2.
- The main issues raised by submitters around RDP are
that:
- it creates increased compliance costs, particularly for small and medium-sized enterprises (SMEs), because a new RDP1 may need to be calculated for each day of leave, and
- it may create incentives for employees to take alternative holidays on "high rate" days.
- Much of the discontent around RDP is that it has increased the cost of leave where employers previously paid only an employee's base rate. This was an intended consequence of RDP to avoid the incentive for employers to create pay structures where the base rate of pay bore little resemblance to the employee's actual pay.
Group's recommendations
- The Group explored an alternative calculation to RDP, referred to as standard daily pay (SDP). The Group did not fully agree on some aspects of the calculation, including the definitions of the components of SDP, its application and the accumulation of entitlements.
Options for the calculation of payment for sick and bereavement leave and public and alternative holidays
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
|---|---|---|---|---|
| 1. Keep RDP (status quo) and provide more information and guidance and promote the use of the online tool to calculate RDP |
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Employees:
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| 2. Retain RDP1 and extend the averaging period for RDP2 from 4 weeks to 52 weeks (the Department's preferred option) |
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Employees:
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| 3. Standard daily pay[23] (SDP) |
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Employees:
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| 4. 'Ordinary pay'[25] |
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Employees:
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| 5. Average daily pay (ADP)[26] |
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Employees:
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Further options for the use of standard daily pay
- As part of their recommendation on SDP, the employer
representatives also recommend:
- using SDP to calculate payment for annual holidays
- changing the way holiday and leave entitlements are calculated to be in work units (for example, annual holidays would be accumulated at 4/52 of contractual hours and sick leave at 1/52 contractual hours)
- including alternative holidays in annual holiday balances (and thereby changing entitlements to alternative holidays around the amount of alternative holiday received and removing employees' ability to choose when they take the alternative holiday), and
- allowing employers and employees to agree to different calculation methods that may be lower than those provided in the Act.
Additional options for the use of standard daily pay
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
|---|---|---|---|---|
| 1. Use SDP to calculate payment for annual holidays |
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Employees:
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| 2. Accumulate entitlements in work units |
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Employees:
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| 3. Include alternative holidays in annual holiday balance |
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Employees:
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| 4. Allow employers and employees to agree on alternative methods to any prescribed in the Act |
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Employees:
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C. Transferring public holidays
Background
- Prior to a Supreme Court decision in 2007 employers and employees could agree to transfer public holidays[27]. Allowing the transfer of public holidays was intended to provide flexibility around the observance of public holidays that recognised the operational needs of the employer and the cultural or religious beliefs of employees[28].
Issues
- The Supreme Court decision and subsequent monitoring by the Department highlighted that the intended flexibility of the previous transfer provision was operating (in some cases) at the expense of minimum standards. For example, public holidays being transferred to non-working days or without genuine agreement. Submitters were asked for feedback on how the previous transfer provisions had operated. Most submitters commented that the ability to transfer had worked well for them. Unions commented that the transfer could be used by employers to avoid providing public holiday entitlements.
- The majority of submitters did not support allowing the transfer of public holidays. The main issues were administrative complexity and compliance costs; it was unnecessary as employees could use other types of holidays to celebrate other days of significance; and it may reduce the significance of public holidays.
- Submitters identified the benefits of allowing the transfer of public holidays as: recognising and enhancing cultural diversity; greater flexibility for employers and employees to reach more diverse arrangements for public holidays; and reduced costs from avoiding the payment of penal rates on public holidays.
Group's recommendations
- The Group recommends allowing the transfer of public holidays and included specific conditions for transferring public holidays.
Options on the transfer of public holidays
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
|---|---|---|---|---|
| 1. Status quo (only shifts that cross into or out of a public holiday can be transferred[29]) |
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Employees:
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| 2. Allow employers and employees to agree to transfer public holidays, at either parties' request |
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Employees:
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Conditions for the transfer of public holidays
- The Group recommends that the following
conditions[31] should be included in the
legislation should the ability to transfer public holidays be
restored:
- the public holiday to be worked must be identified
- the other day on which the public holiday is to be observed must be identified or identifiable
- the public holiday must otherwise have been a working day for the employee
- the public holiday should be transferred to a day that is otherwise a working day for the employee and not another public holiday
- the agreement must be complete, including on the observance day before work commences on what would otherwise be the public holiday
- there must be a true agreement which is informed and voluntary
- the parties must reach their agreement in good faith consistent with section 73 of the Holidays Act 2003, and
- while an agreement to observe a public holiday on another day may result in no time and a half, or alternative holiday, for working on a public holiday, the avoidance by the employer of the obligation to make such a payment must not be the objective of the transfer.
- These conditions seek to prevent some of the problems associated with the previous transfer provisions, including preventing employer-driven transfer agreements. The Group considered that the primary driver of an agreement to transfer public holidays must not be because the employer wishes to avoid paying time and a half for work on a public holiday.
- The Department of Labour considers that the conditions
outlined above:
- could provide greater clarity for employers and employees around how transfer agreements should operate
- are likely to provide a check on potential employer abuse of a transfer provision, and
- would help to ensure that transfers only take place where there is genuine agreement between employers and employees as the agreement is required to be made in good faith.
- Including more specific conditions around transferring public holidays in legislation is likely to have greater compliance implications for employers and employees. However, this should be offset by the increased certainty around when and how public holidays can be transferred, as well as providing protections for employees.
- The Department of Labour also considers that employees and employers should record their agreement in writing, whether in an employment agreement or otherwise. This would assist with the parties' understanding and enforcement of any agreements and is consistent with the requirements for transferring shifts that cross into or out of a public holiday.
Limited ability for employees to request to transfer public holidays
- A limited ability for employees to request to transfer public holidays would be similar to the suggestion for limiting the ability for employees to request to cash up annual holidays.
- Based on submissions, there are likely to be some employers who do not wish to or will be unable to agree to employees' requests to transfer public holidays. For instance, it may not be operationally feasible for the workplace to open when only one employee is working. If employees have a general ability to request a transfer, employers would have to consider all requests they receive even though they may have no intention to ever agree to the request. They will be unable to have a "no transfer" workplace policy. This may increase employment relationship problems if an employer does not agree to an employee's request to transfer.
- If employees have a limited ability to request transfer, employers should advise employees before they accept an offer of employment that the employer has a "no transfer" policy[32], which may be set out in the employment agreement. The employee would be unable to then make a transfer request at a later date unless the employer changes their policy. For existing employees, the Department of Labour expects that employers would consult with their employees in the development of any policies on transferring public holidays in good faith.
- Allowing employers to not have to consider requests to transfer through the use of workplace policies may be seen as not being in line with the good faith requirements on employers and employees. However, this is balanced by ensuring that employers are up front with employees about their position on transferring public holidays.
- This option should also limit compliance costs for businesses that are never able to or wish to agree to transfer public holidays, as they will not have to consider requests they would never agree to. However, it may make the transfer provision harder for employers and employees to understand and may increase employment relationship problems if it is not correctly implemented and followed.
D. Casual employees
Background
- Casual employment is usually employment on an "as and when" required basis, with no guarantee of set hours or continuation of employment. Casual employees have many of the same employment rights, entitlements and obligations as other employees.
- According to Statistics New Zealand's Survey of Working Life 2008[33], 9.4 percent of employees were temporary employees[34]; 52 percent of these were casual employees.
Issues
- One of the main issues around casual employment is the general lack of knowledge about employment rights and obligations for casual employees, which in turn contributes to the inaccurate treatment of permanent part-time employees as casuals. On the basis of their employment status some employees are denied access to holiday and leave entitlements. The viability of some sectors with a highly casual labour force may be maintained in part by employers not providing access to holiday and leave entitlements (either deliberately or because of misconceptions about entitlements).
- The underlying issues around casual employment (a general lack of awareness and the inaccurate treatment of some permanent part-time employees) are wider than holiday and leave entitlements. Working out entitlements for casual employees can raise issues for employers and employees, as well as undermining the provision of entitlements for some employees.
Group's recommendations
- Beyond providing more educational material on casuals' employment entitlements the Group recommends making no changes in this area. They consider that the existing law already provides adequate protection for casual employees and that the key issue is ensuring the calculation and delivery of entitlements.
- In December 2009, the Department undertook a campaign to raise employers' knowledge about employment rights and obligations for casual employees.
Options for casual employees
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
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| 1. Status quo |
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Employees:
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| 2. Define "casual employment" in legislation |
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Employees:
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| 3. Provide an additional tool for determining an otherwise working day by including the "but for" test in legislation[35] (the Department's preferred option) |
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Employees:
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| 4. A "loading" for employees with intermittent or irregular work patterns so they receive a payment in lieu of paid holidays and leave |
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Employees:
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| 5.Awareness raising |
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Employees:
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E. Accumulation of alternative holidays
Background
- Alternative holidays are an explicit codification of the legal right to a "day in lieu" introduced by section 7A of the Holidays Act 1981 and confirmed by the Court of Appeal in Labour Inspector v Telecom Networks and Operations Ltd [1993] 1 ERNZ 492 (CA). An employee who works on a public holiday that is an otherwise working day for them is entitled to a full day's alternative holiday regardless of the amount of time the employee worked on the public holiday. The provision for an alternative holiday seeks to recognise that employees have been unable to observe a full day's public holiday and gives them the opportunity to take a full day's holiday at another time that is significant to them. In practice, the employee is observing their entitlement to a paid public holiday on another day. If they had not worked they would have an entitlement to a full day's paid public holiday on the actual day.
- An alternative holiday must be taken on a day that is agreed to by the employer and employee. If they cannot agree, then within the first 12 months of becoming entitled to the alternative holiday, the employee can choose the day they take their alternative holiday taking into account their employer's view of when is convenient. After 12 months the employer can direct the employee to take an alternative holiday on a date of the employer's choosing. In both cases, at least 14 days' notice must be given to the other party.
- There is no limit on the number of alternative holidays that can be accumulated. To assist with the management of leave, after 12 months employers can direct employees to take an alternative holiday or the parties can agree to exchange the alternative holiday for payment.
Issues
- The issue of accumulation of alternative holidays was included because the Department of Labour was advised that the transitional provisions around "days in lieu" earned under the 1981 Act caused problems for employers because some employees choose to take their alternative holidays first because they can choose the day on which they take the holidays (and RDP provides a financial incentive to choose days on which their RDP is greatest) leaving a large accumulation of old "days in lieu", creating a financial liability for employers. This did not come through as an issue in submissions and the Group did not make recommendations for changes around accumulation.
- From submissions, it appears that the main issues for employers about alternative holidays are that employees receive a whole day's holiday for working part of a public holiday and employees are able to choose when they take their alternative holiday within the first twelve months. Information on the analysis of alternative holiday entitlements is included in the table below.
Group's recommendations
- The Ministerial Advisory Group was split over the
treatment of alternative holidays. The employer representatives considered that
alternative holidays should be:
- accrued according to the number of hours an employee works on a public holiday, and
- taken in the same way as annual holidays, whereby the employer and employee would agree on the timing of the alternative holiday or employers can direct when an employee takes the alternative holiday (employees would lose the ability to determine when the alternative holiday is taken during the first 12 months of becoming entitled to it).
- The union representatives recommend no change because they consider that payroll systems do not have problems dealing with the accumulation of alternative holidays and that the calculation is not complicated. They consider that employees who work on a public holiday should continue to be entitled to a full day's alternative holiday as it compensates them for the lost opportunity to enjoy the public holiday.
Options for the accumulation of alternative holidays
- The Department of Labour considered some options to address the issue of accumulation of alternative holidays. However, the options seek to address what is an issue for only a small number of employers and the Department does not consider that any of the options will make a significant improvement to the operation of the Act in a way that meets the objectives of the review.
Options for entitlements to alternative holidays
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
|---|---|---|---|---|
| 1. Status quo |
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Employees:
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| 2. Restrict employees from taking two or more alternative holidays on consecutive days without their employer's agreement[38] |
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Employees:
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| 3. Remove ability for employee to decide when alternative holiday is taken[39] |
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Employees:
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| 4. Employees receive a half day's alternative holiday if they work up to half a public holiday and a full day's alternative holiday if they work more than half a day |
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Employees:
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| 5. Employee receives alternative holidays equivalent to the number of hours worked and are unable to choose when the alternative holiday is taken. Alternative holidays are included with annual holidays[40] |
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Employees:
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F. Treatment of public holidays
Background
- The Act provides for 11 paid public holidays: New Year's day, 2nd January, Waitangi Day, Good Friday, Easter Monday, ANZAC Day, Queen's Birthday, Labour Day, Christmas Day, Boxing Day and a provincial anniversary day.
Issues
- Issues raised by submitters on the treatment of public
holidays include:
- mondayisation[41] can cause confusion, especially identifying which day is the public holiday for some workers
- concern that public holiday entitlements favour employees who work Monday to Friday, as a large proportion of holidays are observed on a Monday
- concern that the concentration of public holidays in the first half of the year coincides with peak horticulture and tourism periods. These industries consider that they face greater public holiday related costs when compared with other industries, and
- current public holidays were considered by some submitters to be less relevant to modern New Zealand society.
- The main cause for concern for employers appears to be public holiday entitlements (time and a half and an alternative holiday) rather than their treatment.
- A small majority of submitters suggested changes to some aspect of the current public holidays. However, there was no clear consensus on what changes should be made.
Group's recommendations
- The Group considered two potential changes that were within scope of their terms of reference (in addition to reviewing the status of Easter Sunday). The Group recommends the status quo as there appears to be insufficient appetite for change.
Options for the treatment of public holidays
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
|---|---|---|---|---|
| 1. Status quo (the Department's preferred option) |
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Employees:
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| 2. Mondayise Waitangi and/or ANZAC Day[42] |
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Employees:
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| 3. Establish a new public holiday between Queen's Birthday and Labour Day |
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Employees:
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- The Group also considered changes to the treatment of the Christmas and New Year public holidays, but these options were outside of their terms of reference so they did not pursue them.
G. Status of Easter Sunday
Background
- Easter Sunday is traditionally seen as a day of significance. However, since 1936 Easter Monday has been recognised as the public holiday because at that time most people worked Monday to Friday.
Issues
- As Easter Sunday is not a listed public holiday, employees who normally work on a Sunday are not entitled to time and a half and an alternative holiday when they work on Easter Sunday, or to a paid day off if they do not work or their workplace is closed (unless provided in their employment agreement).
- Easter Sunday is a restricted trading day under the Shop Trading Act. Submissions indicate that there is some confusion over the status of Easter Sunday as a public holiday and the inconsistencies with shop trading restrictions.
Group's recommendations
- The Group were split in their recommendations on Easter Sunday. The employer representatives recommend the status quo. The union representatives recommend making Easter Sunday an additional 12th public holiday.
Options for the status of Easter Sunday
| Option | Benefits | Disadvantages/Costs | Impacts | Assessment |
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| 1. Status quo |
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Employees:
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| 2. Make Easter Sunday an additional 12th public holiday |
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Employees:
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| 3. Replace Easter Monday with Easter Sunday as a mondayised public holiday (the Department's preferred option) |
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Employees:
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Other issues
Components of gross earnings
- The Holidays Act provides a definition of gross earnings (section 14). Some submitters raised concerns that there are no clear definitions of some of the components of gross earnings. These include discretionary payments, allowances irregular payments and exceptional payments. The Department of Labour intends to include explanations on these terms in its publicly available guidance. It is also recommended that definitions of discretionary payments and allowances are included in the legislation. These definitions are based on the policy intent behind these two terms.
Increasing the effectiveness of the enforcement of the employment relations framework
- The Department considers that the fairness of the legislation to employers could be increased through more efficient and effective enforcement. Under the current system some employers may deliberately delay compliance with the Holidays Act (for instance payment of holiday pay). This can create an unlevel playing field for employers who are complying. Currently labour inspectors can spend a disproportionate amount of time recovering relatively small amounts of wage or holiday pay arrears. Moreover, the application process for penalties can delay the timely resolution of non-compliance. Providing more efficient enforcement mechanisms will encourage greater compliance with legislative requirements while minimising the time spent on individual cases, particularly when dealing with repeat offenders.
- A Departmental practice development programme is in place to extend the skills of, and non statutory levers available to, labour inspectors. Within this context, a wider range of statutory enforcement tools would support greater responsiveness to businesses and a more flexible and efficient use of inspection resources.
- The Minister of Labour is reporting to Cabinet on options to address the limitations on the enforcement powers of labour inspectors within existing resources in the paper seeking Cabinet approval of the Minister's recommendations for the Employment Relations Act 2000. As part of this overall package on enforcement the Department recommends increasing the penalties for non-compliance with the Holidays Act from $5,000 to a maximum of $10,000 for individuals and from $10,000 to a maximum of $20,000 for companies and other body corporates.
- The Department considers that current penalty provisions are not adequately deterring non-compliance. Increasing penalties provides an incentive for employers to comply and conveys a public message that breaches of minimum entitlements are not conducive to good commercial practices.
Back to report - Review of the Holidays Act 2003
Footnotes
[17] Statistics New Zealand (2008) Survey of Working Life. Available at www.stats.govt.nz
[18] Department of Labour (2009) The effect of the Holidays Act 2003 on small and medium enterprises – a qualitative study. Available at: www.dol.govt.nz
[19] While employers will be paying an additional week’s wages, for example, this will be offset by the employee working for an additional week. This assumes that workers’ productivity is the same during the additional week’s work as at other times. Cashing up annual holidays may have an impact on workplaces’ budgeting/financial management depending on whether they have planned for the additional payment.
[20] “Year” means the year from which an employee becomes entitled to annual holidays. For instance, if an employee starts work on 1 February 2010, they are entitled to four weeks’ annual holidays on 1 February 2011. The employee could make a request to cash up one week of annual holidays on or after 1 February 2011 and before 1 February 2012.
[21] Employees with traditional working hours or where pay rates and hours are easily identifiable such as salaried and part-time employees. According to the Survey of Working life (March 2008 quarter) 62.7 percent of employed people said they usually work all of their hours between 7am and 7pm, Monday to Friday (standard working times), and 35.3 percent said they did not.
[22] In the Department of Labour’s 2009 research few employees had entitlements to alternative holidays. Those who did were likely to take them with their annual holidays in order to have a longer break rather than on a specific day because of the rate of pay. The research did not find any examples of employees taking sick leave because of higher rates under RDP, though this may be related to the fact that none of the employees were aware of specific entitlements. (Department of Labour (2009) The effect of the Holidays Act 2003 on small and medium enterprises – a qualitative study. Available at: www.dol.govt.nz). The issue about employers having to manage suspected sick leave abuse and concerns around absences on particular days (for example, a pattern of absences on Mondays or Fridays) are not new issues. If employers believe that employees are gaming sick or bereavement leave in order to get a certain amount of pay, the Act provides employers with tools to manage the taking of the leave. Section 68 of the Act allows employers to obtain medical certificates within three days’ absence if they have reasonable grounds to suspect their employees are not genuinely sick. The Department considers that this balances any perceived incentive to abuse sick leave entitlements.
[23] SDP = annual gross earnings divided by contractual hours for the relevant period multiplied by the contractual hours of leave taken. The Group did not reach a consensus on the definitions of these components. Annual gross earnings means gross earnings received by the employee in the 52 weeks immediately prior to the last pay period prior to the period of leave, where gross earnings has the definition set out currently in section 14 of the Holidays Act 2003 (i.e. all payments made under the employment agreement to the employee excluding non-contractual payments such as discretionary payments, ACC payments etc and reimbursements (whether incurred or assessed) and employer contributions to superannuation). [Where employees have been employed for less than 52 weeks the annual gross earnings is from when they commenced employment.] Contractual hours means the work units or hours which the employee is required to work under the employee’s employment agreement (including leave) [see section 65(2)(a)(iv) of the Employment Relations 2000] and excludes for example overtime or additional work units or hours for which the employee was paid under the employment agreement, but did not work at the request, or with the consent of the employer. Work units means the unit of time in which all leave is accrued and taken as agreed between the employer and employee and, failing agreement, is the appropriate unit as determined by a Labour Inspector. [Note the employer and union representatives did not agree on whether to use “work units” or “hours”.] Relevant period means the period or periods (including leave) in which the employee earned the annual gross earnings. Leave means any form of paid leave under the Act (but not for example any form of leave without pay).
[24] In the year to September 2009, 47 percent of surveyed salary and ordinary time wage rates increased. This is lower than other recent changes which ranged between 55 percent (in the year to June 2009) and 62 percent (in the year to September 2008). (Labour Cost Index, available from Statistics New Zealand, www.stats.govt.nz)
[25] Ordinary pay was the proposed formula in the Holidays Bill when it was introduced into Parliament in 2003. It was a two tier system: 1) ODP1 was the amount of pay (including any commission and the cash value of any board or lodging that the employee would have received under the employment agreement for an ordinary day. If an employment agreement sets a composite rate of pay, then ordinary pay includes the constituent parts of that rate unless the constituent parts of that rate clearly defined and able to be excluded under excluded payments. 2) ODP2 was an averaging formula = gross earnings for four weeks (less excluded payments) divided by the number of days worked or on paid leave. Employers and employees could agree to an alternative rate that was greater than ODP1 or ODP2. Excluded payments were payments payable in defined circumstances or at defined times not being payments for an ordinary working day (e.g. overtime, bonus payments, productivity or incentive based payments (except where payment by the piece is the primary or sole method of payment).
[26] Average daily pay is an averaging formula based on an employee’s gross earnings for the previous 52 weeks before the end of the pay period immediately before the calculation is made.
[27] New Zealand Airline Pilots’ Association Industrial Union of Workers Incorporated V Air New Zealand Ltd (SC 91/2006 [2007] NZSC 89).
[28] Since at least 1908, employment legislation has recognised the concept of public holidays being observed on days other than the calendar days on which the public holiday actually falls. The original purpose of transfer was to allow employees a day off from work to observe a day of religious or cultural significance with their families when this day fell on the weekend. The 2003 Act maintained the position under the Holidays Act 1981, where the specified public holidays were default days which applied in the absence of an agreement providing otherwise.
[29] An amendment to the Holidays Act in 2008 allows employers and employees working a shift that crosses into or out of a public holiday to reach agreement that the public holiday can be recognised on one whole shift. This was because businesses operating over 24 hour periods and their employees were reported to be experiencing significant disruption as a result of the Supreme Court decision.
[30] The Act provides that provincial anniversary days can be observed on the “day of the anniversary of a province or the day locally observed as that day”. For example, in 2007 there was no consensus on a single day of local observance for Otago Anniversary day (the competing dates were Monday, 24 March or Tuesday, 25 March). Workplace by workplace agreements around when the public holiday should be observed was restricted by the inability of employers and employees to agree to transfer the public holiday.
[31] These conditions are based on tests set out in case law, summarised by Anderson J in The New Zealand Airline Pilots Association Industrial Union of Workers Incorporated v Air New Zealand Limited SC 91/2006 [2007] NZSC 89.
[32] Some employers may never wish to agree to transfer for operational reasons.
[33] Statistics New Zealand (2008) Survey of Working Life. Available at www.stats.govt.nz
[34] Temporary employees were defined as an employee whose job only lasts for a limited time or until the completion of a project. They included: casual workers; temporary agency workers and fixed-term workers.
[35] An employee’s entitlements to a public holiday, an alternative holiday, sick leave and bereavement leave are all determined with reference to whether the particular day would have been an otherwise working holiday under the Act. The Act currently sets out a number of factors to assist employers and employees to determine what would otherwise be a working day (section 12). From cases such as New Zealand Fire Service Commission v New Zealand Professional Firefighters Union36, Labour Inspectors have developed a tool commonly known as the “but for” test. This tool helps an employer or employee to work out whether an employee would have worked on a particular day “but for” a public holiday or sickness. The test is recognised in case law but is not actually listed in the Act.
[37] A casual loading that included public holiday provisions would average the cost of public holidays over a year. For seasonal work during the winter months, there may be no public holidays, however, employers would still be required to pay a loading which included payment for public holidays. Conversely, for seasonal work over summer and Easter, where there are a number of public holidays, employers may pay less through the loading than if they were paying for each individual public holiday.
[38] The employee could still choose the date for one day’s alternative holiday but not for two or more in a row.
[39] Employer and employee agree on when the alternative holiday is take and if they don’t agree, the employer can decide
[40] As per the employer representatives’ recommendations under “Further options for Standard Daily Pay”
[41] When Christmas Day, Boxing Day, New Year’s Day and 2nd January fall on a weekend, the public holiday is observed on the weekend by weekend workers and on the following Monday or Tuesday by other workers. For example if Christmas Day is on a Saturday, a worker who normally works Saturdays observes the public holiday on the Saturday. A worker who does not work Saturdays observes the public holiday on the Monday. Employees are entitled to only one Christmas Day public holiday each year.
[42] Waitangi Day and ANZAC Day are observed on the actual date (6 February and 25 April) regardless of whether they fall on a weekday or weekend as the actual date is of national significance. Mondayising these public holidays would align their treatment with the Christmas and New Year holidays. This would mean that when Waitangi Day and/or ANZAC Day fall on the weekend, weekend workers would observe Waitangi/ANZAC Day on the actual day and other workers would observe the public holiday on the following Monday.
[43] The estimated wage bill for an average Sunday is $64.0 million. The cost of making Easter Sunday a 12th public holiday would incur an additional cost of $64.0 million to cover the cost of an alternative holiday for those employees working on Easter Sunday. The cost of providing time and a half would be up to $32.0 million. There is data that indicates that a majority of collective agreements already include time and a half or more. The estimate of $32.0 million may be an upper bound. The costs to employers will depend on the extent to which: employment agreements already contain provisions for penal rates and an alternative holiday; employees actually work on Easter Sunday now, and may in the future, and changes to work patterns where working on Easter Sunday impacts on shift work. This estimate is based on the 1999 Time Use Survey published in 2001 and the Quarterly Employment Survey up to December 2009 (total weekly gross earnings) and the Linked Employer-Employee Data (LEED). The Time Use Survey showed that 6.1 percent of all paid working hours were on a Sunday. There is no reliable information on the extent that penal rates currently apply to Sunday work.