Holiday perk disappears

Many employers offer staff an extra week of annual leave as a recruitment incentive - bringing the standard three weeks' holiday a year to four.

However, from April 1 next year, providing staff with four weeks annual leave will become a legal requirement - cancelling out the perk. So should staff on four week's holiday expect to get five?

Jo Copeland, Telecom general manager corporate HR, says Telecom is one organisation that cannot afford to offer staff five weeks annual leave.

"The costs really are prohibitive. If we were to move to five weeks leave for all staff, we would have to do it for over 4000 people which would require us to hire a large number of additional staff to cover the increased absences. Every new hire doesn't just cost us the salary. We also have to pay for recruitment costs, additional premises, computer costs, phone costs, induction and training time. We simply do not have the resources to do this," says Copeland.

Presently, Telecom staff get three or four weeks annual leave. The telco also offers extended leave without pay for certain people who want to travel or pursue other interests, and offers two 'company holidays' in addition to annual leave between Christmas and New Year. Copeland says employers have limited amounts of money to spend on employee benefits before the cost starts to impact other areas like base salaries, so Telecom spends its employee benefit money on IT and telecommunications benefits - for example all Telecom staff get a discounted mobile phone, broadband and home phone line.

"This benefit has been chosen over others such as creches, additional leave, gyms, [and the] personal trainers provided by other employers because it is something we can uniquely provide that is of real value to absolutely everyone. It benefits not only our staff, but their families too," says Copeland.

Taking a different track, Cosmetic company L'Oreal, which already provides staff with four weeks annual leave, says it will now offer five weeks annual leave as an employment incentive.

Jeff Lewis, director and HR manager for L'Oreal, which employees 180 people in New Zealand, says holiday entitlements are a key component of being an employer of choice. In addition to its decision to move to five weeks leave, L'Oreal also provides an extra week for people who have been employed for five years, and an extra four weeks of leave above the annual entitlement for the tenth year and fifteenth year of employment. So a staff member with L'Oreal for 10 years can expect 10 weeks of paid annual leave in the tenth year.

"At every annual company conference we have between 10 and 15 people going up to be recognised for long service," says Lewis.

He says L'Oreal is in a competitive industry with a high staff turnover rate and the hairdressing industry is particularly notorious for turnover, with creative people who don't like structured work environments. Reducing turnover rate through incentives such as extra leave pays off, says Lewis, because it's more affordable to concentrate the HR resources of a small business on retention strategies than on recruitment and selection.

Lewis says L'Oreal sales and management staff work the hours it takes to get the job done and L'Oreal doesn't provide time off in lieu - as such, the company is happy to provide an extra week of leave above the legal entitlement.

"Salaries as a proportion of our total turnover are not the size of some industries, so [paying for] extra leave is not something that has a negative financial impact; increased staff morale far outweighs the effect of increases in wages," says Lewis.

Vanessa McCambridge, HR manager for prescription pharmaceutical company AstraZeneca, says as early as 2004 AstraZeneca, which already offers four weeks' annual leave, started to plan what it would do to balance the 2007 holiday entitlement law.

The company eventually decided against a fifth week of leave in favour of flexible working hours, technology that allows people to work from home, and an extra five 'work/life balance days' for personal, family and mental health reasons. The new incentives were introduced in January.

McCambridge says the company's decision followed a survey of its 59 New Zealand staff, a global employee survey of pay and performance satisfaction and work/life balance issues, and a local focus group. AstraZeneca discovered its staff wanted better work/life balance provision, and weren't sure what they were allowed to ask for in terms of employment incentives.

"So the [pending] new leave law was a great opportunity. Our people now get five work/life balance days a year to put towards something that's meaningful to them and we don't feel this has [negatively] impacted the business at all," says McCambridge.

She says there has been a "huge" decrease in staff turnover between 2005 and 2006, which she attributes to the extra work/life balance days together with other employment incentives.

But what if people aren't interested in an extra week of leave on top of the four weeks they know they will get from 2007? After all, not everyone wants a better work/life balance or prefers extra leave to other employment incentives - like cash.

Lewis says while L'Oreal would prefer staff to take the extra leave on offer, it doesn't force them to - people who want to work instead are paid out.

"We are aware of the Y generation and people who would rather have cash than benefits. We also have young people who say 'I don't want health insurance; I'd rather have the money'. We're not totally against that," says Lewis.

Like many employers, L'Oreal does not allow its people to accrue holidays, and holidays are not 'carried over' after 18 months. L'Oreal also conducts staff surveys and has an employee benefits committee comprised of different staff from different positions and age groups who meet once a year to discuss employment incentive trends and what the company could offer staff going forward.

"I read somewhere that companies that offer employee benefits are out of pace with the rest of the world; I totally disagree with that. We offer a superannuation scheme, health insurance; life insurance for death and disability; upgraded health care and the additional week after five years; there's also profit share scheme for full time employees," says Lewis.

McCambridge says AstraZeneca has received no feedback to suggest its staff would prefer a different group of employment incentives to those it has developed. However, she says staff can take the company benefits of a superannuation programme in cash if they don't want to join it.

Over the next 12 months, employers large and small are likely to re-evaluate leave and other employment incentives in light of the new leave law; results are likely to be interesting and, depending on company size and resources, attractive for employees.

THE LAW

* By law, you are entitled to a minimum of three weeks' paid holiday whether you work full-time or part-time. As of your first annual leave eligibility date after 1 April 2007, you will be entitled to four weeks' paid holiday.

* What constitutes a week's holiday is determined by you and your employer. For example, if you work three days a week, a week's holiday will usually be three days.

* If your employer closes down (for example, at Christmas or the end of a season) and you are entitled to annual holidays your employer can make you take them during the closedown, but must give you 14 days' notice.

*Source: Department of Labour website, October 2006