KEY POINTS:
Q I thought that the increase to four weeks annual leave wasn't due to happen until 1 April 2007. But some of my staff are saying they should be accruing their four weeks leave already. Could you please clarify when employees become entitled the extra week?
A
This issue has caused confusion among many employers. You are right that employees will not become entitled to a minimum of four weeks annual holidays before April 1st this year. In fact, they won't become entitled to that until their first 'leave anniversary date' falling after 1 April 2007. But employers might allow their staff to begin accruing the extra week's leave earlier than this. If they do, a separate record should be kept of any accrued leave as opposed to earned leave so holiday pay can be properly calculated if the employment ends.
The employee's anniversary date is key to when the employee becomes entitled to annual leave. A leave anniversary date is a date agreed between the employer and the employee. For example, in the employee's employment agreement. If none is agreed, it is the anniversary of the employee's start date.
When an employee's next anniversary date after 1 April 2007 falls, the employee becomes entitled to four week's leave. So employees whose anniversary dates are, for example, 2 April 2007, will be entitled to four weeks as at that date. But employees with anniversary dates of 31 March 2008, will not be entitled to four weeks of holidays until that much later date.
Your employees have asked about accrual of leave. The date an employee becomes entitled to the extra week's leave is different to the date for beginning to accrue the extra week's entitlement. This is because many employers allow employees to accrue their leave at 1.25 days per month in advance of actually becoming entitled to it. The cost of the four weeks annual leave should be accrued at a rate of 1.66 days per month from the employee's first anniversary date falling after 1 April 2006. This will mean the full extra week will have been allocated to the employee by the time their first anniversary date after 1 April arrives.
Although you might allow accrual of leave in advance of becoming entitled to it, it is important to keep a separate record of leave an employee actually becomes entitled to. Otherwise, it will be difficult to calculate the employees holiday pay entitlements if they leave. Employees who leave are only entitled to holiday pay for annual leave actually earned and untaken. They are not entitled to holiday pay for accrued leave they have not yet become entitled to.
To summarise, no employees become entitled to a statutory minimum of four weeks leave before 1 April this year. But some employers might allow employees to begin accruing the extra week's leave before that date so that they will have accrued the full extra week by the time their next anniversary date after 1 April 2007 arrives.
* Rani Amaranathan is a solicitor in the employment team of transtasman law firm, DLA Phillips Fox.