This is the first major overhaul of the Holidays Act since 2003.
The government has accepted the Holidays Act taskforce recommendations and changes will be introduced into parliament mid next year. They are set to make payments clearer, transparent and simpler.
Taskforce Recommendations for the Holidays Act 2022
The recommendations seek to align with modern work practices where employees work flexible and variable hours.
Annual Leave, Bereavement Leave, Sick Leave & Family Violence Leave Changes
The recommendations revise the calculations for paying leave entitlements to make them more transparent. The proposed changes include new calculation methods and tests to determine an "otherwise working day." There will also be changes to determine how much leave an employee needs to use for a period away from work.
The recommendations include revised tests for determining leave eligibility, and new processes for leave calculations.
One of the recommendations is the ability for employees to take holidays in advance on a pro rata basis, referenced to the length of service. Currently the entitlement is to 4 weeks per year with no entitlement to take leave until the completion of 12 months.
Bereavement leave, sick leave and family violence leave will also be available from the first day of employment. The rules around bereavement leave will be widened to 3 days leave for more family members, including cultural groups and more modern family structures. Employees returning from parental leave will be paid at their full rate for all their annual holidays.
Rules for holiday pay for casuals and holiday pay are to be simplified.
Changes to reflect transparency and lessen any disadvantage to employees who are affected by close downs.
The inclusion of discretionary payments such as bonuses and commissions will be clarified to ensure that the holidays you take are based on what you have been paid. This will require employers taking a careful look at how they pay incentive schemes such as bonus and commission payments if they don't want them to be included in the holiday pay calculations. The changes will mean adjustments to payroll systems. However, the cost will now be backend, hopefully alleviating the costly risks of getting it wrong.
There will be a transition stage before the act comes into force to allow for implementing the changes through payroll systems.
Have your say
The changes have yet to be implemented. The government expects to introduce legislation based on the recommendations into parliament in early 2022. The process will provide an opportunity for employers to have their say through the select committee stages of the bill.
Please contact Buckett Law for advice and assistance on how this affects you.