Holidays Act problems

April 10th, 2016 at 2:00 pm by David Farrar

Susan Hornsby-Geluk writes:

The recent exposure of employers paying holiday pay incorrectly has lifted the lid off a festering can of worms. …

So, where and why do the issues arise?

Firstly, the Act provides for annual holidays in weeks – employees are entitled to four weeks leave a year. This creates all kinds of problems because typically, we take our holidays, and our payroll systems record our entitlements, in days or hours rather than weeks.

While it’s easy to divide a “week” into a number of days for those who have a steady Monday – Friday work pattern, that is not necessarily the case for shift workers, part timers and people who work overtime. In these cases the days and hours of work may change from week to week.

Where employees move between full and part time employment, the situation becomes even more complex, requiring recalculation of leave balances based on the new hours.

Secondly, the Act contains a significant number of different calculations and formulae that must be used for working out what to pay people who are on holiday or leave.

Employees get paid “relevant daily pay” (or a different formula if this cannot be worked out) for sick and bereavement leave; time-and-a-half of relevant daily pay for public holidays; and the higher of average weekly earnings or ordinary weekly pay for annual holidays.

Average weekly earnings is the total of an employee’s gross earnings over the last 52 weeks, divided by 52. This calculation includes the value of all allowances, overtime, penal rates, incentive payments, contractual bonuses and other regular or semi-regular payments earned in the period.

Almost no employers actually calculate holiday pay different to normal pay – and to be honest the law shouldn’t require it.

Most employers just pay you your normal daily rate on a day you take annual leave. They treat it as if you were in the office. That is the common sense thing to do – you don’t get paid more or less by taking one of your 20 days annual leave.

Sadly the law though is way more complicated as described above. If you worked one extra day seven months earlier, then your average pay is higher and on your annual eave days you should get paid a few cents more.

Also if you had a pay rise, then your annual leave pay may be a bit lower than your new rate, as it is over the average of the last year.

It is becoming increasingly clear that the Holidays Act is not fit for purpose. Tinkering with it in the past has not fixed the problem, and has only added to the complexity.

What is required is a complete rethink and a clean sheet of paper.

Seriously, if companies with the resources of Fonterra cannot get it right, what hope is there for anyone else?

I agree. The compliance cost burden on medium and small employers would be huge. They just want to pay what they normally pay, when someone takes leave.

What I would do is set some principles such as:

  • Leave  is calculated as hours, being 8% of your annual hours (for 4 weeks leave)
  • The pay rate for leave is your current contractual pay rate

So for every 100 hours you work, you earn 8 hours leave. And no calculating average pay rates for the last year – just use the standard current pay rate they get for ordinary time.

Same should apply for public holidays.

Mondayising Waitangi and Anzac Days

February 8th, 2012 at 12:04 pm by David Farrar

In my blog at Stuff I say:

But how significant would this law change be, in terms of labour costs? On average it will result in two extra days of paid holidays every seven years. Over seven years there are around 1600 paid workdays, so the increase in labour cost is 2/1600 or 0.12 per cent. 

This is a pretty modest increase in labour costs. It is about 1/16th the cost of having a 2 per cent employer contribution to KiwiSaver.

I’m an employer myself, but I’m in favour of this bill. As an employer I budget for 11 public holidays a year anyway when working out my staff costs, and I suspect most employers do the same. This law change would give certainty to both employers and employees, and the impact on labour costs is very modest.

You can comment over at Stuff, as well as here. I also cover in what future years the bill would actually impact.

Members’ Bills

February 7th, 2012 at 5:15 pm by David Farrar

Two brand new MPs had their bills drawn from the ballot today. Good fortune for both of them.

Tamaki MP Simon O’Connor had the Joint Family Homes Repeal Bill, which is embedded below.

Joint Family Homes Repeal Private Member’s Bill

The bill was previously in the name of Rangitata MP Jo Goodhew. As she is now a Minister, she can’t sponsor it. The bill looks to be uncontroversial. Stuff notes:

The Joint Family Homes Repeal Bill will abolish a 1964 law protecting the family home.

O’Connor said the Law Commission had recommended scrapping the old law which ”afforded the family home protection against the winds of financial adversity” because the law was unused as the same protections were afforded in more recent legislation.

”The Matrimonial (Property) Act made it very clear spouses and partners have the ability to get joint ownership of things.”

Dunedin North MP David Clark also had selected the Holidays (Full Recognition of Waitangi Day and Anzac Day) Amendment Bill, which was previously in the name of Grant Robertson.

I don’t have a copy of the bill yet, but it proposes that if ANZAC Day and Waitangi Day fall on a weekend, they be Mondayised.

I don’t think it is a particularly important issue, and it was ridicolous when people called for an urgent law change last year because both days were at weekends. However as I noted at the time, I’m not against a change and think the bill should be supported, even though it does impose some small extra costs on businesses.

The additional wage cost is around 0.11%, so not huge. In return for some certainity around the number of days off, I think it is worthwhile.

UPDATE: The bill (when it was in the name of Grant Robertson) is on the web here. The key clause is:

 if either of the public holidays … falls on a Saturday or Sunday and the day would otherwise be a working day for the employee, the public holiday must be treated as falling on that day … and (if) the day would not otherwise be a working day for the employee, the public holiday must be treated as falling on the following Monday

That is sensible, so it does not disadvantage those who do work on weekends.

Goff rewriting history

August 3rd, 2010 at 9:00 am by David Farrar

Compare these two transcripts. The first is from Radio Sport on 20 July 2010:

JAMIE MACKAY: Phil, you and I will agree to disagree on that one. What about cashing in some of your holidays for money?

PHIL GOFF: Well, I don’t have huge objections to that, as long as the decision is freely arrived at by the worker, and the worker is not pressured to do it. If you’ve got that safeguard in, then if somebody chooses to do that, then I’m quite relaxed about it

Pretty clear statement from Phil Goff. And one I agree with incidentially. But after his party president and EPMU boss asserted on The National that opposition to National’s policy to give workers a choice was core Labour party policy, Phil is trying to pretend he never said it.

Here’s what he then said on Q+A on 1 August 2010:

Paul Holmes: You stated that you were relaxed about selling, or the government’s plans to allow workers to sell the fourth week of their holidays. Um, you don’t stand by that any more, do you?

Phil Goff: No, what I said was of a range of things that the government is legislating for that will hurt the interests of ordinary working New Zealanders, that’s lower down my list of priorities

That might be what Phil wishes he said, and what he wants the unions to think he said, but it isn’t what he said. It’s a pretty blatant fib.

But the unions have spanked him and reminded him that they decide industrial relations policy, not the Leader.

I also like the EPMU talking points that giving workers a choice of cashing in one week’s leave is “hurting their interests”. God forbid workers have choices.

Carter defiant and calls for a new leader

July 29th, 2010 at 6:34 pm by David Farrar

Chris Carter has called for Goff to be replaced and is not going to quit. NZPA reports:

Phil Goff is a nice guy but not a winner, disgraced MP Chris Carter said today just hours after being ejected from the Labour caucus over a letter aimed at undermining his party leader.

His single-page letter to selected Press Gallery political editors said union-based MPs would challenge Mr Goff over his “relaxed” stance on Government plans to allow workers to cash in their fourth week of holiday which is against Labour policy.

Mr Carter said his letter was an attack on Mr Goff’s leadership.

“I no longer believe it’s possible for him to win the election,” he told reporters.

“I think I owe it to the people I represent and the people who voted for our party that we have a leader who can win the election.

“Look, Phil Goff is a very nice guy but he’s just not going to win and his latest flip-flop over the tradeable fourth week… was the last straw for me. Yes I was attempting to get a momentum going where our caucus would think about a leadership change and I am hoping that my actions will cause some of my caucus colleagues to reflect on something which I think almost all of them would come to the conclusion: that nice as Phil is he’s just not going to win.”

The flip-flop over the tradeable fourth week’s leave was made on the low profile Radio Sport farming show. As far as I can tell, the only media mention of it was here on Kiwiblog. So it is a nice indication of the usefulness blogs can play in getting stuff said by MPs into the political beltway. If a reader had not sent it to me, and if I had not blogged it, Goff”s comments may have never become the catalyst for the challenge from Carter.

Goff supports National’s holidays policy

July 20th, 2010 at 4:17 pm by David Farrar

From the Radio Sport Farming Show:

JAMIE MACKAY:     Phil, you and I will agree to disagree on that one.  What about cashing in some of your holidays for money?

PHIL GOFF:  Well, I don’t have huge objections to that, as long as the decision is freely arrived at by the worker, and the worker is not pressured to do it.  If you’ve got that safeguard in, then if somebody chooses to do that, then I’m quite relaxed about it.

Great to see Phil Goff embracing common sense policies.

The employment law changes

July 19th, 2010 at 10:00 am by David Farrar

Kerre Woodham writes in the HoS how job trials offer a lucky break:

One of the best cameramen I know started off at TV3 working for nothing. As a young pup, he shared a poxy flat with five other trainees.

Terry was on a two week unpaid work experience. After that, he just stayed, still without a wage, and worked every hour God sent to scrape together enough money to survive while he learned the tools of the trade.

The company got an enthusiastic worker bee for nothing; the kid got the experience he needed to get him the first foothold on the ladder of a career that’s taken him all around the world and to the top of his game.

I suppose the unions would see it as exploitation but Terry was grateful for the opportunity and TV3 got a talented young camera assistant for nothing.

Surely a win/win situation. And isn’t that what the 90-day trial is all about? Workers being given an opportunity to show their worth to an employer who may be uneasy about taking on new staff?

And 40% of those hired with a trial period, would not have been hired if the trial period provision did not exist.

There are also those who are technically proficient at what they do but are monumental pains in the arse to work with and who can be terribly damaging to a small- or medium-sized business that requires its staff to work together co-operatively. If you can trial workers to see how they fit with the rest of the team, that must be a good thing.

Ask anyone who actually has been an employer, and “how they fit into the team” is a crucial element – and something that CVs and even interviews can not always ascertain.

And if they do not fit into the team, the cost can be horrific. Not only are they unproductive, but other staff become unproductive, and you sometimes even start losing your good staff.

Anyway what are the other changes announced by National.

The Employment Relations Authority will have the ability to filter out vexatious or frivolous claims early on.

This is common for almost all tribunals.

The Authority will promote mediation by giving priority to mediated cases.

Oh how evil, promoting mediated settlements.

Behaviour that delays the Authority will be penalised.

I suspect this will be called the Lynne Snowden clause. Her battle with Radio NZ is still ongoing five years later!

Employers’ processes will not be the subject of pedantic

This one is pretty damn important. Unless you are a large corporate with in house lawyers and HR teams, you are unlikely to get he process perfect. The process should always be fair, but too often an employer dismisses an employee for exceptionally good reasons, but the employee gets a few thousand on the way out for minor procedural issues.

Having said that, one needs to be careful not to encourage employers to be lax about following a fair process, and the exact details of any law change will be crucial.

The Authority will be moving to a more judicial mode of operation, with the right to cross-examine witnesses.

My translation of this is that too many witnesses are lying and getting away with it.

Rules on union access to workplaces will change, so that any access will require the consent of the employer. That consent cannot be unreasonably withheld.

I predict that this will be no big deal, despite the loud noise. All it is doing is saying a union should be polite enough not to turn up unannounced when entering private property. Like anyone else they make an appointment, so they may have to ring up and say we plan to come in tomorrow at 10 am to talk about “x”, and the employer will say yeah no probs unless it clashes with something else (maybe they have an important meeting of their own, or are on a deadline and the following day will be much easier).

Employees will be able to trade one of their four weeks’ annual leave for cash. This is only at the employee’s request and cannot be raised in salary negotiations.

Also election policy, and will be welcomed by many employees who will appreciate having a choice.

Holiday pay calculating entitlements will be simpler for employees who have variable hours and pay, using our new calculation known as “Average Daily Pay”. It’s based on the average of an employee’s pay over the past year.

Seems fair to me. Over a year, it should avoid the problem of calculating it just on a previous pay period, when hours may have been very low or high.

Employers and employees will be able to agree to transfer the observance of public holidays to another working day.

Not sure what problem this is solving, but generally flexibility is a good thing.

Maximum penalties will double for employers who don’t comply with the Holidays Act.

Good. Bad employers are the reasons unions push for labour laws that punish all employers. I’m all in favour of tougher penalties for employers who knowingly deprive their employees of their holiday rights.

Employers will be able to ask for proof of sickness or injury within three consecutive days of an employee taking sick leave – but they’ll have to cover the employee’s costs in obtaining proof.

I understand the sentiment behind this one, but am worried about practicality. If you wake up with a temperature, you often don’t go and see a doctor if it passes within a day. Same with food poisoning. So if an employer then requires you to see a doctor, there may be nothing to see by then.

Will be a good area for the select committee to consider how practical it is. The intent (less fake sickies) is good, but one can go overboard in this area.

Constructive work on holidays

December 20th, 2009 at 12:42 pm by David Farrar

The SST report:

WORKERS WILL be allowed to swap one week of their holidays for cash from next year.

The government will introduce legislation early in 2010, despite opposition from unions who see it as a move to rewind the Labour government’s law change two years ago, which increased the minimum annual leave entitlement for fulltime workers from three to four weeks.

This was of course election policy. It also may not mean great change for some people as if you do not take all your annual leave, and leave your job, it gets paid out to you anyway. Also it gives an employee the right to sto an employer closing the business for four weeks over summer, and forcing them to take four weeks leave then. They can now only be forced to tale three weeks leave, and get the fourth paid out as extra salary.

The government will also legislate to standardise the rate at which leave is calculated. There will be a single rate of pay for all leave whether annual, sick, bereavement or public. …

Wilkinson said the only workers who would be worse off under the changes were those who engaged in “gaming” the system; for example, by manipulating their work hours to maximise their pay while on leave.

Under current law, holiday payments factor in penal rates in the four weeks before the holiday. An employee could exploit that by working considerable overtime before going on leave.

Seems sensible, and much much easier administratively.

Wilkinson said the review was needed because the current system was so complex and confusing that even the courts had trouble determining disputes between employers and employees over rates of pay for leave.

“We are not reducing entitlements. We think the new formula for relevant daily pay will be easier to calculate. We also think it will be fairer to employees and employers and prevent the `gaming’ of relevant daily pay calculations.”

I suspect very few employers apply the law absolutely correctly because it is so difficult to understand. Most just pay leave at the normal rate anyway I suspect.

Helen Kelly, president of the New Zealand Council of Trade Unions and a member of the review panel, was worried the government would allow bosses to transfer days in lieu and public holidays to avoid paying double time.

Although she was happy with the proposals as they stood, she was concerned that the final legislation could go further than the report, leaving workers worse off.

“There should be a condition [in the legislation] that the reason for transferring is not to avoid paying time-and-a-half.”

Nice to see a constructive approach by the CTU. They will of course be against the cashing in a weeks leave, but pleased to see not against the other changes necessarily.

Some workers spoken to by the Star-Times were pleased to hear of the law change, saying they would be keen to cash in their leave. Others though, would not. “Hell no, I don’t need the money…I would rather take the break from work,” said one.

And now they will have the choice, so both camps can be happy. Different employees have different needs. Those with kids probably love having a 4th week leave. Those without kids are more likely to love being able to earn some extra money by only taking three weeks. And there are also those in positions who find it hell to take too long a break, as the work piles up so much in their absence. So not treating all employees as wanting the same thing is good.

Among the 241 submissions was a call for March 18 to become a public holiday. Wilkinson said she was “amused” at the suggestion but was not interested in “legislating for behaviour that condones hangovers or the over-indulgence of alcohol”. March 17 is St Patrick’s Day.


What a great idea

October 17th, 2009 at 1:00 pm by David Farrar

The Southland Times reports:

Queenstown’s Pig and Whistle pub will be opening on Labour Day but its 10 workers will not be getting paid statutory holiday time-and-a-half rates.

In fact, they will not be getting paid at all. Instead, staff will take control of the pub for the day, splitting everything in the till after expenses have been paid.

Owner Barry Ellis has offered the same deal to staff at Craft Bar in Dunedin, in a move to circumvent the restrictions of the Holidays Act.

“We would normally close on the day and we thought let’s do something a little bit novel and let them find how it is to run their own business.” …

The staff will have to cover the rent, alleviating Mr Ellis of one expense if he had closed, but he said the real benefit would be strengthening the relationship between staff and managers.

Pig and Whistle duty manager Daragh Cantwell said he was sceptical when the idea was first mooted, realising it would mean waiving wages for the day, but then he had a look at the trading figures supplied by Mr Ellis. “It depends on the day but we think we’ve got a really good chance of doing well.”

He declined to speculate on what riches might be on offer, but said many patrons had already indicated they would be in on Labour Day to prop up the bar.

Seven front-of-house staff and three chefs had democratically planned the menu, entertainment and opening hours, and would evenly split any profit based on how many hours they worked.

I hope they report afterwards, how well it went.

Fear and ignorance

March 24th, 2009 at 9:00 am by David Farrar

Jim Anderton is quoted as saying:

Progressive leader Jim Anderton said calling the plan a “buy-back” did not change the fact that it cut the minimum holiday entitlement. Thousands of workers paid just over the minimum wage would be presented with employment contracts that say they request cash instead of annual leave.

Anderton is either showing his ignorance or deliberately fear mongering. Let there be no doubt – such an employment contract would be illegal and unenforceable.

To quote Kate Wilkinson:

“It has been reported the Government intends on letting employers offer their staff a cash payment to replace their fourth week of annual leave, but in reality they will not be allowed to make such an offer.

“Our policy clearly gives employees the choice – only they can approach their boss and ask to make the trade.

Of course as usual the left are against choice. They create a bogeyman of the so called evil employer who will break the law, as a reason to not give the other 99% of the population a choice.

If I was to use Anderton’s logic, there should be no minimum wage because some employers might propose an employment contract that pays less than the minimum wage.

Cashing in the 4th week of leave

March 23rd, 2009 at 9:00 am by David Farrar

Good to see John Key confirm that National will implement their election policy of allowing workers and employers to decide to cash in the 4th week of annual leave, if they both agree.

What this means is the default is 4 weeks leaves. So you may be on $50,000 and have four weeks leave. You could ask your employer to pay you an extra 2% or $1,000 and drop down to three weeks leave.

Many people will want to keep a fourth week of leave (and will) but equally many would like the option of earning some extra money. This is why choice is a good thing.

And please don’t even try pushing the “Some employers will pressure employees and the poor employees will have no choice” line. Apart from the unlikely motivation of an employer wanting to increase its costs by 2%, you can argue against all and any choice on the grounds that someone may possibly try to pressure someone illegally. Using that logic the state should set all pay rates, as some employers may pressure employees to take a pay cut.