5 CONCLUSION

This study was initiated to further explore the findings of previous survey research and submissions to government stating that businesses find the Holidays Act 2003 complex and time consuming to apply. The sample of firms in this study was selected in order to explore how the Act was being applied in small and medium sized firms that do not have specialist human resources staff and whose employment arrangements would necessitate particular calculations under the Act. This research adds to the work on the compliance costs of employment regulation in New Zealand by looking at the extent to which employers (or payroll administrators) in SMEs understand and comply with the Holidays Act 2003.

The findings of the research show that employer knowledge of the Act follows typical patterns for employment rights legislation, that is, employers are most familiar with the provisions they encounter most often. Thus there was less understanding of specific provisions of the Act around sick leave and bereavement leave because these provisions have a relatively low impact on these employers, but high awareness of annual leave (or the percentage this would add to casual workers' pay) and public holiday entitlements.

Employees too were most familiar with annual leave and public holiday entitlements as they encountered these most often. Employees could name reliable sources of information about their entitlements under the Act but did not use them. Although this did not necessarily mean employees were paid less than they should be, enhancing employer and employee's knowledge of employment rights remains a challenge.

In line with this finding, knowledge of relevant daily pay and annual leave calculations was associated with employers whose staff regularly worked varying daily or weekly hours. It was unclear whether other employers/payroll administrators consistently made the appropriate calculations when required through the use of payroll software.

Employee 'gaming' of relevant daily pay provisions was not evident - this may be related to their lack of awareness of the relevant daily pay concept or to the employment relationships in the firms studied.

Although knowledge varied, employers in the study did not consider the provisions of the Act difficult to understand. Only the largest employer (of 75 staff) found any calculations required a significant amount of additional time. It was thus not evident from the study that the Act imposes higher compliance costs on SMEs compared to larger businesses. Rather, where relevant daily pay calculations are required, compliance costs may increase with larger numbers of employees.

The marginal compliance costs imposed by the Act were considered insignificant by employers in the study - even by the largest employer who was affected the most - compared to the direct costs of annual leave and public holiday entitlements. Therefore, amending the Act to alter the calculations required (whilst maintaining current employee entitlements) is likely to have no effect on these employers - or may even impose additional costs through change to pay and leave systems. However amending the Act to give employees the option of selling back a proportion of annual leave may alleviate employers' difficulties with covering for staff leave where this is an issue, and was a suggestion welcomed by employers and employees in the study.

Other impacts of the Act on employers (shops not trading on public holidays, the use of surcharges, the reduction of existing employee entitlements and employers working longer hours) related to the direct costs of employee entitlements rather than the compliance costs. Overall, however, employers considered the Act was a very minor constraint on their businesses compared to the product market and - to a lesser extent currently - the labour market.

There was insufficient clarity around how possible changes to transferring public holidays and changing the treatment of some public holidays might operate in practice to enable employers to assess whether it would be useful for business reasons, or for employees to gauge whether it would provide them with any advantage.