Holidays Act to be overhauled

24 Feb 21

The Government has accepted recommendations to make the Holidays Act clearer and to provide greater certainty to employers and employees.

Following a joint request from employers and unions, the Government established a Taskforce to suggest improvements to the Holidays Act 2003 (the Act). Although the Taskforce was set up in 2018 and reported its recommendations in 2019, the Government has just published the recommendations along with its response, which is to approve the recommendations in full. This is positive news as the Act has long been a source of frustration for those tasked with its interpretation and application. The recommendations are expected to take effect in early 2022 in the form of amendments to the Act.

The recommendations

The Taskforce made 22 recommendations focused on making the Act clear, certain, and simple to apply.

Some of the significant recommendations include:

  • Introducing a new, less complex methodology for calculating holiday pay.
  • Allowing employees to take annual leave in advance on a pro-rata basis.
  • Removing the “parental leave override” – ensuring that the value of annual leave of parents returning from parental leave is not diminished.
  • Removing the ability to pay employees’ holiday pay “as you go” for those engaged on fixed-term agreements of less than 12 months duration.
  • Removing the ability to require employees to be available for work during periods of annual leave.
  • Providing sick leave from the first day of employment, with the entitlement increasing by a day at the completion of each month of work, until the full entitlement is reached.
  • Allowing sick leave and family violence leave to be taken in units of less than a day, with a minimum unit of a quarter of a day.
  • Extending the list of people for whom bereavement leave applies to include stepfamily, family by marriage, cultural family groups, and extended family.
  • Implementing a new test which determines which employees are eligible for sick, bereavement and family violence leave.
  • Giving employees the option of choosing to transfer their leave entitlements to a new employer, or having them paid out and reset in the event of a sale and transfer of a business.
  • Requiring employers to keep more comprehensive leave records that show how leave entitlements and calculated, paid, and held.
  • Requiring employers to provide pay slips to employees for each pay period.

The approved recommendations are likely to result in slightly increased wage costs to employers. However, it is anticipated that these increases will be mitigated by reduced risks of non-compliance, and the reduced need for human resources given the proposed simplification of the Act. This remains to be seen however, and will ultimately be informed by the detail of the legislation, to be drafted.

Want to know more?

We will provide more information on the amendments to the Act as it becomes available.
If you have any questions or would like to discuss the amendments to the Act in detail, please contact our specialist Employment Team.


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