The Government’s proposal to reform the Holidays Act 2003 seems promising for employers, however time will tell whether changes make it across the line and into law.
The proposed changes are promised to increase certainty and reduce complexity – features which are undeniably missing from the current legislation. Of particular interest are a proposed pro-rata approach to calculating sick leave entitlements and a shift towards an accrual system for annual leave.
A preliminary Bill detailing the proposed changes will be released for public consultation in September.
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Details of proposed reforms
Minister for Workplace Relations and Safety, Brooke van Velden, recently announced the Government’s intention to reform the Act.
This announcement comes not long after the previous Labour Government’s attempt to reform the Act, which involved the creation of a taskforce that made 22 recommendations for change. The current Government seems to have taken a simpler approach and is set to release an exposure draft of a Bill in September 2024. An exposure draft is a preliminary version of a Bill, which seeks public consultation prior to its introduction to Parliament.
Changes to the Act are promised to increase certainty and reduce complexity – features which are undeniably missing from the current legislation. Of particular interest are a proposed pro-rata approach to calculating sick leave entitlements and a shift towards an accrual system for annual leave.
A pro-rata calculation of sick leave would mean that sick leave entitlements would be proportionate to the number of hours an employee works, instead of the current one-size-fits-all approach. This may come as a relief to some employers, especially following the previous Government’s increases to sick leave to 10 days per annum, which rendered small businesses particularly vulnerable to staff shortages.
Meanwhile, changes from an entitlement system to an accrual system for calculating annual leave may simplify calculations and reduce compliance costs for employers. This could be especially helpful in employment situations where employees’ work variable hours or receive one-off (non-discretionary) bonuses. As the standard five-day, 40-hour work week becomes less common, a simplified approach would certainly be welcomed.
MBIE is currently inviting stakeholders to participate in the targeted consultation on the exposure draft of the Bill who:
- have expertise in implementing the Act in payroll and business systems; and/or
- understand the impacts and outcomes of the Act for various groups of employers and/or employees.
For further information on the consultation process, you can read more here.
All in all, the Government’s proposals seem promising for employers so far. For more information about the proposed changes or any other employment-related matters, contact Lane Neave’s Employment Law team.
