HUMAN RESOURCES INSTITUTE OF NEW ZEALAND
SUBMISSION TO THE PUBLIC ADVISORY GROUP OF THE MINISTER OF LABOUR ON THE review of the holiday act 2003
Date of Submission: August 2009
This response by the Human Resources Institute of New Zealand [HRINZ] to the Discussion concerning amending the Holiday Act 2003 (without reducing current entitlements), looking to make it easier to understand, reduce compliance costs and make it more flexible in application to minimise impacts it has on business practices.
HRINZ is the professional organisation for people who are interested or involved in the management and development of human resources. HRINZ represents the interests of 3800 individual members who work in private and public sector organisations throughout New Zealand. HRINZ provides its members with education and information services, conferences and seminars, publications, representation at government and official levels, and networking opportunities. HRINZ helps members to develop their professional skills and knowledge as human resources practitioners and key decision-makers in their organisations.
HRINZ may be distinguished from other groups in that it represents professional human resource management in contrast to other groups who may be more focussed on economic interests.
In the terms of reference provided by the Department of Labour, the main focus was to provide recommendations on the following points:
a. The calculation of relevant daily pay (RDP)
b. Trading the fourth week of annual leave for cash at the employee's request
c. Allowing all employers and employees to agree to transfer the observance of a public holiday listed in the Act to another day
d. The accumulation of alternative holidays (days in lieu)
e. The treatment and entitlements of casual employees in relation to holidays and leave
f. Treatment of public holidays
g. Shop Trading on Easter Sunday and its interface with the Holidays Act 2003.
and to provide feedback and views on the current provisions/entitlements regarding the Holiday Act 2003 from a HR perspective as well as highlighting any impacts or issues that amending the Act could have on business throughout New Zealand, providing any recommendations where appropriate.
HRINZ invited our members to participate in this submission and received a high level of response to this issue. We have aggregated our member’s responses into a single response on the issues canvassed.
a. The calculation of relevant daily pay (RDP)
- Looking at any specific complexities and costs associated with calculating RDP or using alternative calculation making it easier to calculate without returning to the ordinary pay calculation under the Holidays Act 1981
Our member’s opinion of the current approach to calculating relevant daily pay (RDP) is that this is working fairly well and provides a fair method of calculation for public holiday entitlements, as most organisation use software to assist them with these calculations.
We are aware that some Small to Medium Enterprise’s (SME’s) have experienced difficulties with RDP calculations, however this is generally due to a lack of software being used by these organisations and/or not having a thorough understanding of the RDP calculation. According to our members, this is especially the case when having to calculate incentive bonuses and overtime payments in leave entitlements. Moreover these adjustments are often seen as unreasonably inflating RDP, particularly where incentive payments are annual and overtime is worked in preparation for a statutory day.
It was felt that any legislative changes to be made to the RDP calculation would have a financial implication for large and small businesses alike to ensure they were compliant with any legislative change. If any changes are implemented, in our view a simpler method to process RDP calculations would have to be introduced to ensure that clarity was provided for all types of businesses involved and that the process, if changed, is particularly less onerous for small businesses to implement.
Our members suggest that, if RDP is to be replaced then, the Government should consider average daily earnings) over the preceding twelve months. ADE would make life easier for small businesses as it is based on reality rather than supposition and is easier to calculate, as it includes regular contracted earnings, excludes one off payments of any description, excludes cost of lodgings and is calculated on the last 12 months earning or start of employment if 12 months hasn’t been worked.
Our members believe that the current calculation of RDP is working well; businesses are familiar with this practice which provides a fair calculation method for public holiday entitlements for businesses to follow. Any changes would be unnecessary, time consuming and potentially costly for large and small businesses to implement. If any changes are to be considered we would recommend using average daily earnings based on the last 12 months or the start of employment if the employee has not worked for 12 months.
b. Trading the fourth week of annual leave for cash at the employee’s request
- What are your views on an employee and employer agreeing to trade the employee's fourth week of annual leave (or some other part of the employee's minimum annual leave entitlement) for cash?
- Are there any specific issues, for example, criteria or costs and benefits that the Group should take into consideration?
- If you think an employer and an employee should be able to agree to trade the fourth week's leave for cash, what protections do you see would be necessary to ensure entitlements are not reduced and employees' choice to trade the fourth week is genuine?
On the issue of trading the fourth week of annual leave for cash at the employee’s request, our members’ generally were not supportive of this proposal. Our members’ views were based on the grounds that employees should have meaningful rest periods outside their work environment and felt that trading leave for cash undermined what the Act stands for and could have implications on long-term employee productivity and Health and Safety due to reduced time for rest and recovery rates.
Our members felt that trading an employee’s fourth week’s leave would not provide employers, particularly of SME’s, any benefit especially as NZ has the lowest annual leave entitlements in the LEDC with many other countries providing 25-30 days.
From another business perspective it was viewed that this potential trade off could be seen as disadvantageous to employers for the following reasons:
· Firstly, Employers would have to be very clear when agreeing to this request, particularly when assessing whether an employee’s request is “genuine”. How the term ”genuine” is used by employers would have to be clearly specified to ensure that both parties’ interests were protected, as this term could be viewed as subjective with varying interpretations.
Employees’ rights should be protected to ensure that are not pressured into cashing up their fourth week of annual leave by their employer.
Employers should be given the right to refuse an employee’s request on financial grounds to ensure that the employers are not faced with additional financial costs on a regular basis by employees expecting this option to permanently increase their annual salary.
· Secondly, could SME’s really afford to cover this additional business cost?
SME’s struggle enough particularly in our current economic climate, so it was felt that this would not provide any really financial benefit for SME’s, as business in effect would have to pay employees to work the fourth week as well as pay them out for the annual leave they didn’t take?
· Thirdly, another potential difficulty with this proposal is that it could introduce difficulties when trying to plan or calculate staffing levels. Businesses would be unsure of how many employees would be looking to ‘cash up’ their fourth week making it difficult to both gauge staffing levels and budgeting for salaries and /or wages, which would impact on the businesses financial cash flow.
If any changes to the legislation were to be made regarding cashing up of the fourth week of annual leave we would recommend that the term “genuine” should be defined to ensure that the employer has appropriate guidance when considering whether the employees request or need is genuine. Clear guidance on the evidence employers would have to provide would be required to safeguard and ensure that employees were not being forced into this by their employer, along with the proviso that employers were under no obligation to grant a request on a regular basis.
We would however caution that providing specific compliance rules on how to manage this issue could in turn create more time consuming administration and management that could potentially be costly for large and small businesses to implement and comply with.
Our members believe that there should not be any change to the Holiday Act which will allow employees a statutory right to request to cash in their fourth week’s annual leave.
c. Allow all employers and employees to agree to transfer the observance of a public holiday listed in the Act to another day
What are your views on employees being able to transfer public holidays to another day, for example, observing Ramadan instead of Good Friday?
If you have done this previously have there been any issues with transferring?
What protections do you see would be necessary to ensure entitlements are not reduced and employees' choice to transfer the public holiday is genuine?
While our members generally do not believe that it is necessary make any changes to the Holidays Act on the issue of allowing employees to transfer the observance of a Public Holiday (PH) to another day there is merit in providing for an employee to make a request to transfer their PH, provided that there are legitimate grounds for the employer to refuse that request without fear of a personal grievance being raised.
Whilst we acknowledge that we do live in a multi-cultural society, the Holidays Act is important in preserving the uniqueness of our own culture and history. ANZAC, Waitangi and Christian based public holidays are part of the New Zealand lifestyle. Our members do not feel that we should give up our heritage so readily.
Our members feel that giving an employee a statutory right to transfer a PH to another day would incur huge compliance costs for both large and small business owners. A number of organisations with the exception, particularly, of the hospitality industry, close down on public holidays. If employees, on an individual basis, were able to transfer their PH to an alternative day, then this should not apply to any holidays that fall during a period of any close down period otherwise employers would have no option but to open their business on the PH for small numbers of employees in order to provide them an opportunity to work. Our members’ felt that SME’s in particular would struggle to manage the complexity of administering and recording employee PH transfer changes, including the increased costs of providing the opportunity to work on what would otherwise be the PH. This will ultimately increase the businesses overall operational costs.
Currently there are organisations throughout New Zealand who already consult with and allow their employees to transfer the observance of a PH to another day. These arrangements are specifically negotiated and agreed upon with an individual’s employer and often include a written clause within that employee’s employment agreement. While, under current legislation, this is not legal employers and employees do make these arrangements work. This current method gives the employee and employer the freedom to negotiate the employee’s individual needs without causing additional financial implications for the business.
If any change were to be made to the Holidays Act to enable transfer of the PH to an alternative day, then there should be clear grounds available to the employer to refuse such request, as applies under Part 6AA of the Employment Relations Act 2000 (as amended in 2007) to enable flexible work arrangements. Further, provided a refusal is within clear grounds, the employee should not have the right to take a personal grievance if their request is declined within those grounds. This would legitimise what employers and employees are already doing and provide a safer framework within which both parties can operate.
Without clear grounds for considering and declining requests allowing the transfer of Public Holidays (PH) to another day, could lead to more employment relations issues.
Our members, while seeing the current Act working well, would support a change to give employees the statutory right to transfer their PH to another day as requested, provided such right is accompanied by a set of clear grounds available for an employer to refuse the request without fear of a personal grievance. Our members would not want the right to transfer a PH apply to any PH that falls during any annual close down period or any other close down period agreed between the employer and the union(s) representing their employees. We would recommend that such a change should consider similar aspects set out in Part 6AA of the Employment Relations Act 2000 (as amended in 2007).
We would also recommend that the rights of the employees who do not wish to transfer their public holidays are protected. These rights can be easily protected by providing that any transfer of a PH can only be initiated by the employee. Our members feel that employee’s should not be forced into transferring their public holidays to align with others in the work place who do request a transfer.
d. The accumulation of alternative holidays (days in lieu);
What are your views on employees accumulating a number of days in lieu (alternative holidays)?
Our members have no issues with the current legislation regarding the accumulation and accrual of lieu days and see no change as necessary or required.
The purpose of public holidays is to allow the employee an opportunity to celebrate a significant cultural value or celebration.
We are aware that many organisations, due to operational reasons, will have to work during a public holiday. We feel that most employers already have in place very clear and specific guidelines when dealing with the accumulation of days in lieu, which vary from taking the time in lieu off within one to 12 months after it has been accrued. These are most apparent for organisations that operate on a 24/7 basis.
Our members feel that if any changes to the legislation are to be made regarding this issue, SME’s may end up carrying large accumulations of PH which could have serious impacts for their business. Clearly defined time frames for taking of alternative days were provided as guidance for employers to avoid carrying large employee accrual balances and to ensure employees are given a reasonable period of time to take the accrued leave.
Our members believe that there should not be any change regarding the accumulation of alternative holidays (days in lieu). When the occasion occurs, employers and employees should have the right to discuss and agree (and if necessary enforce) a reasonable time frame within which the accumulated alternative days must be taken.
E. The treatment and entitlements of casual employees in relation to holidays and leave
Discuss your understanding of what casual employees are entitled to under the Act.
Discuss any complexities associated with calculating holiday and leave entitlements and payments for casual employees.
Do you have any examples of casual employees being advantaged or disadvantaged by the application of the Act?
On the issue of the treatment and entitlements of casual employees in relation to holidays and leave, our members have a clear understanding of casual workers and that the current Act clearly clarifies what casual workers are entitled to.
Our members feel that the current process is a fair and straightforward process to follow which gives no issues with the Act.
Difficulties and complexities only arise when business owners, especially SME’s, do not understand the legislation concerning casual employment. As a result they do not communicate clearly to the casual employee what type of employment they are entering into including their entitlements regarding annual leave and sick leave at the start of the employment agreement.
There were only a few examples given by our members of their experience of casual employees being advantaged or disadvantaged by the application of the Act.
- An example provided where casuals believed they were disadvantaged are generally employees who are working regular hours for a short period, which would cover a public holiday, but get no work and hence no pay for that day- yet their pay rate is no different from others on permanent contracts.
- An example provided where casuals have been advantaged by the application of the Act was when a casual employee has argued successfully with their employer (as the employer does not want to upset or lose them) in favour of being paid for sick days even though they have a contract which clearly states that they are not entitled to any sick leave and ended up negotiating a rate of pay that may well be higher than if they were a permanent employee.
Our members believe that any changes to the current legislation concerning casual employment may cause confusion, uncertainty and unnecessary complexity for the employers who are happy with the current legislation and application of the Act.
Our members believe that there should not be any change to the current legislation and application of the Act regarding casual employment, which is clearly defined and understood. Any changes could cause unnecessary confusion on casual employment for the employers.
F. Treatment of public holidays
- What are your views on the significance of the 11 public holidays listed in the Act? (These are: Christmas Day; Boxing Day; New Year's Day; 2 January; Waitangi Day; Good Friday; Easter Monday; ANZAC Day; Queen's Birthday; Labour Day; and Provincial Anniversary Day.)
Our member’s opinion is that all of our public holidays should be retained as they are significant part of New Zealand’s history and culture. There is no compelling reason to change them. All those that currently fall on a Sunday should be Mondayised.
We feel that Public Holidays (PH) provide real “days off” for employees to celebrate a significant event at the same time without the employers worrying about employee workloads increasing in their absence.
We feel that Waitangi Day, Anzac Day and provincial days should be recognised as New Zealand specific and be Mondayised (if they fall on a Saturday or Sunday) so that the full entitlement is realised.
Our members strongly support moving a public holiday to break up the winter months, to improve employee morale. For example, Matariki Day could be recognised as a public holiday. This not only breaks up the winter months but also gives a significant recognition of New Zealand’s Maori heritage and gives life to our commitment, as a country, to the Treaty of Waitangi.
The issue of public holidays could be simplified for businesses by the Government legislating that when any public holidays fell on a Saturday or Sunday then the following working day should be treated as the public holiday. Our members do, however, acknowledge that mondayising all public holidays would add a significant cost to a business that does not operate on a Saturday or Sunday and may not be practical in our current economic climate.
Our members believe that all eleven public holiday entitlements should be retained and that when they fall on a Saturday or Sunday they should be Mondayised. We also recommend moving a public holiday to break up the winter months. A suitable date is seen as Matariki Day.
G. Shop Trading on Easter Sunday and its interface with the Holidays Act 2003
- Do you consider that Easter Sunday should be recognised as a public holiday?
- If so should it be "Mondayised" in the same way as, for example, Christmas Day is under the Act and replace Easter Monday as a public holiday?
Our members do not see a need to make Easter Sunday an extra public holiday as Easter Monday is sufficient.
Our members believe that Easter Sunday should not be recognised as a Public Holiday. Shop trading is a separate issue covered by a different Act. Any societal moves to allow Sunday trading should be addressed by changes to that Act, rather than complicating and confusing the Holidays Act.
HRINZ believes that the current legislation concerning the Holiday Act is sufficient in terms of understanding and application. RDP works well and provides a fair method calculation for public holiday entitlements for businesses to follow; the intended benefits of any changes are not clear for businesses and would be difficult to reconcile the need to change with the perceived confusion and cost of the change?
Trading an employee’s fourth week of annual leave in practice may not be seen to provide any benefit financial or otherwise to employers. Cashing up the fourth week could make business planning and staffing difficult particularly for SME’s as they may be unsure how many employees would be looking to ‘cash up’ their fourth week. This in turn has potential for making staffing levels difficult to calculate and increasing compliance rules for businesses, which could be viewed as time consuming to implement, manage and comply with. Realistically such a change may increase overall business costs.
To put further legislative requirements around the transfer of public holidays will impose specific statutory obligations for employers to consider, implement, manage and comply with which could cause further difficulties and confusion amongst SME’s who are already struggling with compliance issues.
Most employers understand the legislation and application of the Holiday Act regarding casual employment and to change or add more requirements would cause unnecessary confusion and uncertainty where it is not needed.
HRINZ requests the right to be heard regarding this submission.