The Government will carry out "targeted consultation" as it looks to change the Holidays Act in an effort to "increase certainty and reduce complexity", acknowledging some people's frustration with how the law currently works.
It comes amid years of issues with people receiving less holiday pay than they are entitled to, due to miscalculations in what has been complex legislation.
Among those affected are staff at Te Whatu Ora, which is involved in a years-long project to pay back an estimated $2.235 billion, with 270,000 past and present employees impacted.
As of June 2020, 112 NZ employers made remediation payments to nearly 230,000 employees, totalling $237.7 million - with arrears ranging from an average of $29 to $8000 per employee.
That does not include health or school sector employees.
In a press release today, Minister for Workplace Relations and Safety Brooke van Velden said changes to the way employee sick and annual leave was provided were being proposed.
Van Velden said the changes would improve the Act, with the help of businesses and workers affected.
She said to ensure the new legislation could be implemented across a variety of working arrangements, a draft for targeted consultation will be released in September.
“I have heard from a number of businesses who are struggling to adjust to the previous Government’s decision to double sick leave entitlements for all eligible workers.
“Workplaces that rely on part-time workers are particularly vulnerable to unexpected staffing shortages. To explore this issue further, the exposure draft set for consultation will include a proposed approach to pro-rating sick leave, to better reflect how much an employee works."
Sick leave entitlements went from five to 10 days for eligible workers in 2021.
“Although the previous Government spent many years working on a solution, the advice I have received from officials has led me to the conclusion that there are further opportunities to improve the simplicity and workability of the legislation."
She said in some areas the previous Government’s decisions, in her view, would end up increasing complexity and compliance costs.
One idea floated in the bill would be to change in how annual leave is provided, moving from an entitlement system to an accrual system.
“Shifting to an accrual system for annual leave entitlements is just common sense," van Velden said.
"While workers might not notice any change in their entitlements, from a payroll perspective this should make a huge difference. An accrual system should help avoid the complex calculations that regularly stump payroll software and should therefore reduce compliance costs for employers.
“I want to get feedback from stakeholders who will eventually have to work with the Act. We need the Act to be workable for everyone, from the multi-national corporates to the small-town family run restaurants.
“I believe it is important to hear from small businesses in particular, given small businesses will adopt a range of working arrangements and often do not have the same payroll infrastructure as larger organisations.
As part of other workplace changes since coming to office, the Government has axed Fair Pay Agreements and fully reinstated 90-day trials.
'Everyone knows the Holidays Act is broken'
The Employers and Manufacturers Association said it was looking forward to working with the Government on a fix.
It said the current situation is a "complex shambles" for both employers and employees.
"Everyone knows the Holidays Act is broken," head of advocacy Alan McDonald said.
"It is so complex that businesses are struggling to understand their obligations, resulting in ongoing miscalculations and unintentional errors.
"Large Government departments and employers small and large have all been tripped up trying to understand their obligations. When more than $2 billion is allocated for wrong payments in the health sector you know you have a seriously broken piece of legislation."
It backed an accrual system for annual leave, and pro-rata approach for sick leave.
"A pro-rata model for sick leave will make the system fairer. If you work one day a week, you should not have the same sick leave entitlement as someone who works five days a week.
"Part-time workers will still be eligible for sick leave, but their sick leave entitlement will reflect the hours they actually work, the same as for any other leave entitlement."
Opposition not impressed
Labour's Spokesperson for Workplace Relations and Safety Camilla Belich said there was value in people taking sick days when they were ill, and it helped with productivity. A pro-rata reduction in sick leave entitlements would impact those more likely to work part-time - Māori and Pasifika people, women, mothers and people living with disabilities.
"Part-time workers in New Zealand will receive less sick leave under this proposal," she told 1News.
She said the proposals were taking away an entitlement and would do nothing to help pay people back what they were owed.
The Greens were also concerned about the impact on part-time workers.
"The Government’s tampering with the Holidays Act looks set to complicate leave entitlements and leave workers with less - especially part-time workers," spokesperson for Workplace Relations and Safety Teanau Tuiono said.
"Our economy has been built upon the backs of our workers, stripping them of sick leave would be a slap in the face and a drain on the productivity and morale of our workforce."
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