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Holidays Bill passes into law

Holidays Bill passes into law

The Holidays Bill that gives four weeks annual leave to all New Zealanders was passed in Parliament today.

Labour Minister Margaret Wilson said the overall effect of the Bill is to bring holidays legislation into line with modern business and work patterns while at the same time providing much needed clarity and consistency around holiday entitlements.

The increase to four weeks annual leave would help people achieve a better balance between their work and their personal life, Margaret Wilson said.

“It is also important if New Zealand is to compete successfully against other countries in attracting and retaining skilled people.”

While the annual leave increase applies from 1 April 2007, other provisions in the Bill come into force on 1 April next year.

“The current minimum entitlement of five days for both sick and bereavement leave is insufficient for the increasing number of employees who must balance work, parenting and caregiving responsibilities,“ she said.

“This has been changed to ensure employees have clear and separate entitlements to sick leave and to bereavement leave.”

Margaret Wilson said the Bill also provides that all employees should genuinely be paid rate and a half for the time they work on a public holiday.

“This acknowledges the fact the employee is sacrificing a day of national, religious or cultural significance they could otherwise be spending in relaxation or celebration with friends and family.” The Department of Labour’s information services will be available to help people find out about their entitlements and obligations. These services include the toll-free Infoline, web-based and printed material.


The provisions of the Bill are outlined below.

Annual Holidays

An employee is entitled to three weeks annual holidays upon the completion of 12 months continuous employment. From 1 April 2007 an employee will receive four weeks annual holidays on their next entitlement date. An employer must give an employee the opportunity to take two weeks of their annual holidays in one uninterrupted period if the employee so wishes. In the first instance, timing of annual holidays should be by agreement between an employer and an employee. An employer must not unreasonably refuse to agree to an employee’s request to take annual leave. The entitlement to annual holidays remains in force until they are taken – if an employee is not taking their annual holidays, their employer can require them to do so. An employer may have only one customary closedown period a year where they can require employees to take annual holidays. Note: this does not prevent an employer from closing their business at other times and agreeing with their employees about the use of annual holidays. This represents the status quo, but the Bill clarifies that this applies to only one closedown per year and only where it is customary for the employer to do so.

The calculation of annual holiday pay in various circumstances is clarified. This does not result in any reduction to annual holiday pay. However, an employer will no longer be required to recalculate annual holiday pay where an employee has taken holidays in advance. The change is made to reduce compliance costs.

The Bill spells out in detail how an employee’s holiday pay is to be calculated in situations where:

Entitlement has arisen; Annual holidays are taken in advance; Employment ends within 12 months; Employment ends and entitlement has arisen; Employment ends before further entitlement has arisen;

Payment where leave is taken will be the greater of average weekly pay or ordinary weekly pay.

Payment where an entitlement has not arisen is at 6% of gross earnings. This will increase to 8% from 1 April 2007, when the four weeks annual holidays entitlement comes into force.

“Pay as you go” annual holiday pay (where an employee receives a payment for annual holiday pay with each salary or wages payment) is permitted only where: the employee’s employment agreement is for a period of less than 12 months; or the employee is employed on such an irregular, intermittent or sporadic basis that it would be impractical to provide them with their three week annual holiday entitlement. The employee must also agree that they get their holidays entitlement in this way, the holiday pay must be an identifiable component of the wages and it must be at least 6% (rising to 8% in 2007 when the four weeks annual holidays entitlement comes into force. This is consistent with the objective of annual holidays, that an employee is normally entitled to annual holidays upon the completion of 12 months employment, and that paid annual holidays cannot normally be exchanged for cash. Under current case law, employees can be paid in this manner in some circumstances. This provision provides certainty to employers and employees and will reduce compliance costs and litigation.

Public Holidays

All employees receive 11 paid public holidays if they are days they would normally work . Payment is at relevant daily pay, ie what they would have been paid if they worked on the day. An employee is entitled to an alternative holiday if they work on a public holiday that falls on a day they would normally work. An employee cannot be compelled to work on a public holiday unless they normally work on the day that the holiday falls and they agree to work on the public holiday in their employment agreement. All employees must be paid one and a half times their normal rate for the time worked on a public holiday (an employment agreement cannot provide for a lower rate of pay). All employment agreements must specifically state this right. If it can be shown that the normal rate already includes a provision for time and a half for working on a public holiday this rate may be paid for the first 12 months after 1 April 2004. After that, employment agreements must specify that the employee is entitled to time and a half of their normal rate for working on a public holiday. The separate provisions for rate of pay for working on a public holiday in “factories and undertakings” are removed as the distinctions are irrelevant in today’s environment. The distinction between factories and undertakings and other types of employment is historic and irrelevant in today’s environment. Under the Bill all workplaces will be treated the same.

Payment and alternative holiday entitlements for Waitangi and ANZAC Days are consistent with the other public holidays. Currently an employee is only entitled to an alternative day for working on these days if they are paid ordinary rates of pay. For employees this has meant that they can be paid at a minimal level above their ordinary pay and no longer qualify for an alternative day. Both employers and employees have had to deal with two sets of rules for public holidays. For the purposes of clarity and certainty, all public holidays will now be treated consistently and an employee will be entitled to an alternative day if the day was a normal working day for them, regardless of the amount they are paid for the public holiday.

Where Christmas and New Year public holidays fall on or over a weekend, they are transferred to the following Monday and/or Tuesday based on the working week of the employee (i.e. transferred for employees who do not normally work on the weekend, and observed where they fall for employees who do normally work on the weekend). Currently these holidays are automatically transferred where they fall on a weekend, unless the employment agreement provides otherwise. This can result in a situation where employees who work on the actual days but not the days to which they are transferred are penalised through losing an entitlement they otherwise have. This provision dates from a period when weekend work was limited and has been modernised for purposes of both clarity and fairness

Where an employee is on call on a public holiday that would normally be a working day for them and is then required to work, the employee is entitled to an alternative holiday, and rate and a half payment for the hours worked. Where an employee is on call on a public holiday that would normally be a working day for them and not required to work, the employee is entitled to an alternative holiday if the restriction on the employee’s freedom of action is such that the employee cannot be said to have had a whole holiday. This reflects case law. Inclusion in the legislation is designed to produce clarity and reduce litigation.

Sick and Bereavement Leave

An employee is entitled to sick leave and bereavement leave upon the completion of: six months current continuous employment; or a period of 6 months where the employee has worked for the employer for at least an average of 10 hours per week during that period and no less than 1 hour in every week or 40 hours in every month during that period. Currently an employee is entitled to five days special leave per year (for sick, domestic and bereavement leave). There is currently no statutory provision for accumulation. Sick leave The entitlement to sick leave is five days per year. An employee is entitled to sick leave where they, their spouse , or someone who depends on them for care is sick or injured. Up to 15 days sick leave may be carried over into the next period and this means that an employee can have a maximum entitlement of 20 days. An employment agreement may provide for more sick leave and better carry over provisions. Unused or accumulated sick leave is not paid out upon termination of employment. Bereavement leave An employee is entitled to: Three days bereavement leave upon the death of their spouse/partner, parent, child, sibling, grandparent, grandchild or spouse/partner’s parent; and one day of bereavement leave on any other occasion where, in good faith, the employer accepts the employee has suffered a bereavement, taking into account relevant factors, including: the closeness of the association between the employee and the deceased person; whether the employee has to take significant responsibility for all or any of the arrangements for the ceremonies three days bereavement leave upon the death of an employee’s spouse/partner, parent, child, sibling, grandparent, grandchild or spouse/partner’s parent; and one day of bereavement leave on any other occasion where, in good faith, the employer accepts the employee has suffered a bereavement relating to the death; and any cultural responsibilities of the employee in relation to the death.

Payment for sick and bereavement leave is at relevant daily pay, namely what they would have been paid if they worked on the day. 5. An employer cannot require proof of entitlement to sick leave unless the period the employee is absent is longer than three consecutive calendar days (whether or not the employee would have otherwise worked on all those days). This clarifies an area that has caused dispute and litigation in the past because the Act was silent on the issue. An employer, who is legally able to do so, is not prevented from requiring an employee to establish that there are no relevant health and safety reasons or hygiene reasons that would prevent the employee from working.


An employer is required to inform an employee about their entitlements under the Bill, and to tell them where they can access additional information (Department of Labour Employment Relations Service). This introduces a positive requirement to provide information.

Minimum entitlements under the Bill can be enforced by an employee, their representative or union, an employer or a Labour Inspector.

Only a Labour Inspector may initiate a penalty action.

The current level of penalties are increased to a maximum of $5,000 for an individual and $10,000 for a company or corporation. The current maximum penalty is $500. The Bill brings the penalties for breaches of holidays legislation in line with those under the Employment Relations Act 2000. Note: The Bill does not contain any provision for penalties for continuing offences.


The provisions of the Bill apply to all employees, with the exception of the Defence Force. Only parts of the current Holidays Act apply to the Crown. The definition of “employee” is that of the Employment Relations Act and includes homeworkers.

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