The Holidays Act 2003 is just plain dumb: it is a total mismatch with the reality of New Zealand workplaces and payroll.
In a nutshell:
Paying leave entitlements to an employee should be as easy as paying a wage or salary, but with multiple calculations and multiple situations to apply those calculations and variations to, as well as multiple interpretations, it’s like an employer needs a super computer to calculate leave! And even if you did have that computer you most likely would still not get it right.
One of the reasons for changing from the old Holidays Act 1981 to the present act was to reduce employers’ compliance costs in processing and managing employees’ leave. Well, the present act has FAILED to achieve this at all levels.
BUT this is dumber:
NZPPA was recently contacted by a member who asked about combining annual holiday and sick leave entitlement into one leave pool. They stated that this is being done by a number of employers.
With all the issues with the Holidays Act, this is even dumber than the act itself for the following reasons:
- These are two different entitlements for totally different reasons (one to have a holiday and the other to cover periods of illness or injury).
- One is based on a week and the other is based on a day.
- They are earned differently: paid sick leave at 6 months (5 days) and annual holidays at 12 months (4 weeks).
- They are calculated in different ways: annual holidays is the greater of AWE and OWP (3 different ways) and accrual at 8%. Sick leave is calculated using RDP or if that cannot be determined then ADP.
- There are different rules and criteria around both leave types.
- There are different requirements on what needs to be recorded for the holiday and leave record for both types of leave (Section 81 of the act).
- There is also a range of other issues that would occur when trying to do this within a payroll system and that would NOT be the payroll supplier’s fault!
I have never seen the film Dumb and Dumber but if the act is DUMB, combining annual holidays and sick leave into one leave pool is DUMBER!
There is only one situation where this could work and that is if this was additional agreed entitlement and was nothing to do with minimum entitlement for annual holidays and sick leave. To make this work code it differently and do not mix the two. If you are going to do this talk to payroll first!
NZPPA would always state that you should focus your efforts on ensuring you are following the requirements of the Holidays Act the best way you can in the present environment. Don’t create a further nightmare by doing the latest trendy HR concept.