What will changes to sick leave and annual leave entitlements mean for you?

Sick and annual leave in NZ will soon accrue hourly, changing entitlements for full-time and part-time staff. Photo / 123RF

By Susan Edmunds of RNZ

Leave rules are in for an overhaul. But what’s actually changing, and what does it mean for you?

Here’s what you need to know.

What will be different about sick leave?

At the moment, workers are entitled to 10 sick days per year of employment.

Every year after that, they get another 10 days’ sick leave. Under the Holidays Act 2003, the number of days’ leave that can be accumulated is capped at 20 but employers and employees can negotiate for this to be higher.

Unless it’s in your employment agreement, sick leave is not paid out when you leave a job.

The plan is for that to change to a system in which workers accrue sick leave from the time they start a new job, at a rate of 0.0385 sick leave hours per hour of work.

That would give a fulltime worker the equivalent of 10 days’ leave a year.

This also means you can take a few hours’ sick leave if you need it, rather than a full day.

But Simon Schofield, a professional teaching fellow in the University of Auckland law school, said the big change would be for part-time workers, who would have less leave available to them.

At the moment, even people who work one day a week are entitled to 10 days’ leave a year.

“As part-time workers are working less, the argument is that they should be entitled to less than 10 days’ sick leave,” Schofield said.

“This is reflected in the announcement which provides that part-time employees will be getting less than 10 days based on the number of hours actually worked. The argument against this is that many part-time employees are women who are looking after children.”

Someone who worked 20 hours a week would end up with the equivalent of five full days’ sick leave a year.

There had also been concerns that people working two part-time jobs could get twice the sick leave.

But employment lawyer Alison Maelzer earlier told RNZ that would not be the case in practice.

“An employee’s leave entitlements apply to each job they have,” she said.

“Sick leave is usually paid at your relevant daily pay - the pay you would have got, had you worked on that day.

“So if I work at one job on a Tuesday morning, and one job on Tuesday afternoon, but I’m sick on Tuesday - and I meet the entitlement criteria for sick leave - I’ll take a day of sick leave and be paid my relevant daily pay for job one, and a day of sick leave and receive my relevant daily pay for job two - you wouldn’t be doubling your pay for that day.”

Workplace Relations Minister Brooke van Velden. Photo / Mark Mitchell

What’s changing when it comes to annual leave?

Annual leave will also accrue on an hours basis and people will have the flexibility to take it in hours.

At the moment, workers receive a four-week holiday entitlement after each 12 months of continuous employment.

A “week” of leave reflects the work pattern the person had been working at the time they go on holiday.

This will also change to an accrual basis, at a rate of 0.0769 annual leave hours per hour of work.

That works out to four weeks a year for a fulltime worker.

Accrued annual leave hours will be banked, meaning balances will reflect hours actually worked in the past, not changing as a person’s work pattern does.

That means, if you used to work more hours than you do now, you can potentially use those “banked” hours to take more than four weeks’ off, as long as you have enough banked hours to cover the hours you’re contracted for.

Leave balances will also start to build from the first day of work, instead of people having to wait before their leave becomes available.

What’s this about cashing up leave?

The Government says workers will be able to request to cash up 25% of their annual leave, as at their last 12-month employment anniversary, once a year.

“This means that, where a worker has a large annual leave balance, there will be more flexibility to cash it up. Employers who agree to cashing up will benefit from reduced leave liability.”

What about for casual workers?

At the moment, casual workers can be paid 8% in lieu of sick and annual leave, but some are given sick leave entitlements. Under the new system, all would receive 12.5% under the “pay as you go” system.

And what’s changing for people taking parental leave?

A big problem for some people returning from parental leave is that the leave they have owing is worth nothing in practice, until they’ve been back long enough to build it up again.

New parents will now receive their full pay for annual leave when they return from parental leave.

What happens if I am part-time but I have 10 days’ sick leave in my contract - do the new rules override that?

Schofield said it was likely there will be transitional provisions in any proposed legislation that would make it clear what was to happen when someone’s contract included different entitlements.

“The parties are likely to have an opportunity to renegotiate what works for them. It may be that such existing provisions in employment agreements will be unable to be enforced but it is unclear how this issue will be dealt with at this stage.”

This will also be the case if someone has a collective agreement that gives casual workers leave, or where an employer might have been offering unlimited leave.

Why have there been so many problems with the holidays rules?

A lot of employers have really struggled to pay leave correctly.

Schofield said that was because the world of work had changed from always being a 40-hour Monday to Friday job.

“Many employees are working flexible hours with flexible remuneration structures including commission and bonuses. This has in turn led to complex miscalculations. Substantial arrears for those miscalculations have had to be paid to employees.”

When does the change happen?

The bill will still need to pass through Parliament.

The government said there would be a two-year implementation period between the bill passing and coming into force.

“This provides time for payroll providers and employers to make changes to business and payroll systems,” an MBIE spokesperson said.

“MBIE will ensure that information about the changes is available to support employers, workers and payroll providers as soon as practical after the Bill is passed.

“Until the Holidays Act is repealed, and a new Act comes into force, all of the existing rules still apply. This means that employers still need to comply with the current Holidays Act, and ensure they are providing the correct entitlements and payments to workers.

“Additionally, employers retain an obligation to correct historical underpayments that have occurred due to non-compliance with the current Holidays Act.”