HOLIDAYS ACT REVIEW OVERVIEW

Structure Background to current review Overview of issues paper Next steps Questions

How did we get here? Holidays Act 2003 attempted to provide flexible framework for employers and employees to reach agreement about leave entitlements History and experience have shown that this is not working in practice Additional guidance has been provided but some major problems remain

So what can be done? The Minister for Workplace Relations and Safety has established a Taskforce to review the Holidays Act and recommend changes. Taskforce is chaired by Professor Gordon Anderson, an employment law specialist at Victoria University Taskforce is tripartite and includes: employee representatives (Council of Trade Unions) employer representatives (Business New Zealand) government (MBIE, State Services Commission, Inland Revenue) Taskforce expected to report back to Minister for Workplace Relations and Safety by mid-2019 with recommendations for change MBIE is providing Secretariat support for the Taskforce

What is the scope of the Taskforce’s work? Scope of work is set out in full in the Taskforce’s Terms of Reference (available on MBIE website) but key points are: Taskforce must make recommendations to the Government on policy options for the provision of, and payment for, holiday and leave entitlements that: are clearer for employers, employees, payroll providers and practitioners are simpler than the current Act can be readily implemented in a payroll system minimise compliance costs for employers and any perverse incentives on employers and employees can cater for wide variety of working arrangements aim to protect overall entitlements for employees. Remediation relating to current Act is out of scope.

Will the review succeed? Previous reviews have not resolved issues so why do we think this one will succeed? Two key reasons: Very strong desire from all parties (government, employers and employees) to make this work. Have learnt from previous attempts – understand the importance of robustly testing options that the Taskforce develops to ensure they can work in practice rather than just in theory.

What is the Taskforce doing? Taskforce has developed an Issues Paper that sets out what it understands the main issues with the current Holidays Act to be. Simply the views of the Taskforce – not claiming to be the last word. Wants to hear from key stakeholders, including payroll practitioners, about: whether the issues set out in the Issues Paper are described accurately? whether there are other issues with the Act that are not captured in the Issues Paper (and if so what are they)? any suggestions or proposals for change. The Taskforce is seeking feedback by 12 October 2018.

So what does the Issues Paper say? Section 1: Background to review Section 2: Overview of the Holidays Act 2003 Section 3: Who is affected by the issues with the Holidays Act? Section 4: What are the key issues with the Act? Section 5: Seeks suggestions for change I will focus on what the paper says about Sections 3, 4 and 5.

Section 3 – who is affected by issues with the Holidays Act? All employers and employees are affected by non-compliance with the Act… Even employers with a workforce working standard hours may face challenges (e.g. if not all payments are included in gross earnings). …but it’s harder for some employers for different reasons… flexible or variable work practices can make it hard to implement especially in sectors where these work practices are common (e.g. hospitality, retail) SME’s may struggle especially if they lack dedicated payroll expertise… …while attempts by large employers to systematise payroll can cause problems, especially if working arrangements change …and the effects can be worse for some employees. Those with variable hours and/or pay tend to be the worst affected (e.g. what is a day or a week for someone with variable hours).

Section 4 – what are the key issues with the Act? Some fundamental issues relate to all aspects of the Act… Lack of prescription can be a problem especially when employers and employees don’t reach agreement: for example, defining ‘a week’ if it is not clear from the working pattern can be difficult – employers and employees may be expected to agree this but this engagement and agreement does not always happen. Complexity – e.g. many different calculations included in the Act Employers may not always be clear about which calculations should be used when. Determining entitlements based on work pattern at time leave is taken can be hard (can be open to interpretation or hard to prove if good records are not kept) Lack of clarity related to specific terms: for example, what counts as ‘regular’ in terms of payments to be included in income calculations? Entitlements are set out in weeks and days in the Act – many payroll systems work in hours. Not always clear how to ‘translate’ between different time periods.

Section 4 – key issues continued There are a range of issues related to determining entitlements and payments for annual holidays… What is ‘a week’? – easy for some jobs, very difficult for others – can cause issues if not agreed Incorrect accrual over time – payroll systems may use an accrual system which may not align with the Act Knowing which method to use to calculate payments for annual holidays and using it correctly – e.g. Ordinary Weekly Pay or Average Weekly Earnings and when to use each Using the ‘pay-as-you-go’ provision inappropriately – (e.g. paying PAYG for more than 12 months or for workers who have a regular pattern of work)

Section 4 – key issues continued Other issues relate to entitlements and payments for bereavement leave, alternative holidays, public holidays and sick leave (BAPS): Determining an ‘otherwise working day’ – Act includes a number of factors that should be considered but does not give further guidance Determining what payments are included in an employee’s ‘relevant daily pay’ and when ‘average daily pay’ can be used instead – can be tricky to calculate what employees would have earnt if they had worked

Section 5 – How could things be improved? The Issues Paper doesn’t set out any solutions but poses a number of questions such as: How could holiday entitlements be provided to better reflect flexible working arrangements (both now and in the future)? How could the different calculations for holidays and leave payments be simplified? What changes would make the Act easier to apply to workers with variable hours/days of work? What changes would make the Act easier to apply to workers who receive variable pay (e.g. workers paid by commission)?

Next steps We want to hear from you by 12 October 2018. Are the issues set out in the Issues Paper described accurately? Are there other issues with the Act that are not captured in the Issues Paper (and if so what are they)? Do you have any suggestions or proposals for change? How to make a submission: By completing an online submission form at MBIE’s website www.mbie.govt.nz By sending your submission as a Microsoft Word document to holidays.act.review@mbie.govt.nz By posting your submission (see Issues Paper for address) If you have any questions about the review or submissions process then you can contact us at holidays.act.review@mbie.govt.nz

Thanks for your time Questions or thoughts?