Holidays Act 2003

The Holidays Act 2003 (The Act) introduces numerous substantial and procedural changes to the Holidays Act 1981, which presents for employers, further compliance obligations with respect to employees entitlements, pay calculation and recording requirements.

Rather than attempt to give you exhaustive advice on the new law, we hope to simply highlight for you, the changes to the leave entitlements and changes in compliance/procedural matters. Although, you will need to obtain more detailed advice on much of this to ensure compliance with The Act, post 1 April 2004, the major areas of change and effect, can be categorised as follows:

Annual holidays.
Public holidays.
Sick leave.
New bereavement leave.
Employees rights to annual, public holidays, sick and bereavement leave on resignation.
Requirements for record keeping in relation to all of the above.
The need to update Employment Agreements and future Agreements.

The summary below, is by no means a complete outline of all the provisions of The Act but is a summary of some provisions for your immediate attention.

Annual Holidays

The current minimum entitlement of 3 working weeks holiday remains in force until 1 April 2007. After that date, all employees shall be entitled to a minimum of 4 weeks per year, after 12 months continuous employment (unless leave in advance is agreed to between employer and employee). Employees must be given the opportunity to take at least two of the three weeks annual holidays continuously, if they wish. The meaning of 3 weeks must be clearly defined in the Employment Agreement, especially when dealing with part time or casual employees. Application of annual leave entitlement and pay where there is an annual close down of the business, for annual holidays in advance, unpaid leave, employees work pattern changes, fixed term agreements of less than 12 months and casual employees, are specifically addressed in the Act and need to be understood prior to applying the same. Pay is calculated based on the definitions of “relevant daily pay” and “ordinary weekly pay” which are crucial in calculating the correct payment for leave. Each definition takes factors, other than normal weekly wage, into account. For example, bonus schemes, payments for overtime, cash value of board and lodgings. Employees are entitled to receive their pay for annual holidays before the holiday commences, unless otherwise mutually agreed. Any Employment Agreement that excludes, restricts, or reduces an employees entitlement under the Act shall have no effect. An employee on annual leave who becomes sick during the leave may reach agreement with the employer to take the same as sick leave not annual leave. A similar provision exists for bereavement leave. However, sickness and/or bereavement arising before scheduled annual holiday must be allowed to be taken as sick or bereavement leave that would otherwise have been taken as annual leave. Where an employee has no outstanding sick or bereavement leave due to them, the employer may allow annual holidays in substitution. A public holiday falling on an employee’s annual holiday must be treated as a public holiday and form part of the employee’s annual holiday so long as other specific requirements set out in section 40 (2) of The Act have been complied with. Only one “closedown” period is permitted per year for the employer’s business. There are powers for labour inspectors to make determinations on issues concerning an employee’s entitlements. “Pay as you go” holiday pay is only allowed for fixed term employment arrangements of less than 12 months, or intermittent/irregular workers.

Public Holidays

There are still 11 public holidays. Employees are entitled to a paid day off where a public holiday falls on a day that would otherwise be a working day(s) for the employee. Christmas and New Year (including Boxing Day and 2nd January) are treated differently, where if Christmas and/or New Year fall on a weekend, and the employee doesn’t normally work on the weekend, the holidays transfer to the following Monday or Tuesday to enable the employee to still get paid for that holiday. Where it is a working day for that employee the public holiday is treated as falling on that day and the employee is entitled to that day off on pay. There is a maximum of four public holidays for Christmas and New Year. ·All other public holidays are on the day on which they fall and only apply if it is an employee’s normal working day. ·An employer and employee can agree to celebrate holidays on different days, but cannot agree to reduce the employees public holiday(s) entitlement under the Act. An employee may agree to work on a public holiday in exchange for another day’s paid leave, plus payment of time and a half for working on the public holiday. This also applies to salaried staff or where composite rates for overtime are included in the employment agreement. Similarly, for shift workers, where some of the shift includes working on the public holiday, the time actually worked on the public holiday attracts time and a half payment which must be calculated with reference to the definition of “relevant daily pay”. The entitlement to time and a half on a public holiday must be recorded in all employment agreements. There must be a term of the employment agreement requiring an employee to work on a public holiday, otherwise it is a matter of the employee’s choice. Working part of a public holiday still entitles an employee to a full days alternative holiday at a later stage. Two or more public holidays falling on the same day are treated as one day. There are specific transitional provisions for employees currently working on Public Holidays and who are paid on a “pay as you go basis”. A person who is “on call” during a public holiday, which is ordinarily a work day, is entitled to an alternative holiday, regardless of whether or not a full or part day is worked. He or she is also entitled to this even if he or she has not been called in to work on that day. The alternative holiday needs to be taken at a time mutually acceptable to both parties and is paid at the employee’s “relevant daily pay” for the day taken off.

Sick Leave

The minimum of 5 days after the first 6 months of continuous employment, remains unchanged. A special test applies for employees who have not completed 6 months continuous employment. Sick leave is available for employees personally and when their spouse or a dependent is sick or injured, or needs care. Unused sick leave now may be accumulated to a maximum of 20 days in any 12 month period. Proof of sickness or injury can be required by employers after an employee is on sick leave for three or more consecutive calendar days. Sick leave entitlements are not adjusted for part time employees who remain entitled to 5 working days. Payment for sick leave is at the “relevant daily pay” on that day. Transitional arrangements are in place from the 1st of April 2004. Any unused special leave entitlement under the previous legislation (which included sick leave and bereavement leave together) now becomes sick leave and may be carried forward in accordance with the new Holidays Act 2003.

Bereavement Leave

This is now a separate category of leave. On the death of a spouse, parent, child, brother or sister, grandparent, grandchild and spouses parent, an employee is entitled to 3 days bereavement leave (for each type of bereavement). A further one day’s bereavement leave is available where the employer accepts, having regard to relevant factors in The Act or cultural responsibilities, that the employee has suffered a bereavement. Aside from the above, there is no limit to the bereavement entitlement. The employer must pay the affected employee’s relevant daily pay for each bereavement leave, for that working day. Special tests apply for employees who do not have 6 months continuous employment. Both types of bereavement leave can be taken at any time and for any purpose and do not need to be taken immediately or on consecutive days.

Enforcement And Other Matters

Good faith obligations are set out in the Act. There are new enforcement provisions in place. Where an employer fails to comply with the legislation there is a maximum penalty (for an individual employer) of $5,000.00, and (for a company or other Body Corporate) $10,000.00. Section 73(2) places an onus on employers to inform employees about their entitlements under the Act and to advise them that they may obtain further information from either the Union or Labour Department. (This will need to be addressed in Agreements).

Entitlements On Finishing Work

There are specific entitlements for payment of accrued holiday pay to an employee on termination of employment ·A period of employment is notionally extended for the period of any annual holidays owing, and all public holidays arising during that period must be paid for. All alternative holidays that have not been taken must be paid for. Employees are eligible for sick and bereavement leave while working out their notice period, but any of the remaining entitlements of sick and bereavement leave need not be paid up on termination.

Record Keeping

The main administrative change is an extension to record keeping. The records which must be kept for 6 years are:

The days on which the employee works, if the information is relevant to entitlement or payment under the Holidays Act.
The employees current entitlement to annual holidays.
The employees current entitlement to sick leave.
The dates of any annual holiday, sick or bereavement leave taken.
Payments made for any annual holidays, sick leave and bereavement leave taken.
The dates of and payment for any public holiday work.
The number of hours worked on any public holiday.
The date on which the employee became entitled to any alternative holiday in lieu of a holiday day worked.
The date and payment for any public holiday or alternative holiday on which the employee did not work, but for which the employee had entitlement to payment.
The cash value of board and lodgings provided.
The cash value of any alternative holidays that the employee has surrendered for payment.
The holiday pay due on termination.

All employees must be able to verify his/her entitlements. Most employers will need to update their current payroll system to allow for this extended record keeping and for the calculation of leave entitlement(s) based on relevant daily pay, ordinary weekly pay and average weekly earnings. Failure to keep the correct records may result in an incorrect payment or assessment of leave entitlement(s) and may give rise to claims by employees (or their representative or the labour inspector) which may be costly and inconvenient to employers.

What You Need To Do:

All Employment Agreements need to be up-dated.
It is already clear law that there must be written Employment Agreements, covering all terms of employment.
Record keeping systems need to be up-dated.
Payroll personnel need to be trained on the changes and calculator of entitlements.

Burley Attwood Law | Topics of Interest | Holidays Act 2003