Holiday act and what it means to growers

Grower Magazine - April 2004

This article is intended is intended to give growers a broad overview of the key areas of the new Holidays Act.

The Act came into force from and including 1 April 2004 but a new entitlement of 4 weeks annual holiday will not become effective until 1 April 2007.

Annual Holidays

It is still possible to pay for annual holidays in conjunction with an employee's pay where the engagement is for a fixed term of less than 12 months, or where the employee works on a basis that is so intermittent or irregular it would be impracticable for the employee to be granted three weeks annual leave. In all cases the arrangement to pay in conjunction with the employee's pay must be recorded in writing in the employment agreement. The holiday component must be clearly identified and be not less than 6% of the employee's gross earnings.

If an employer pays holiday pay as they go incorrectly (i.e. without written agreement) and the employment continues for 12 months or more, the employee becomes entitled to a paid holiday in spite of the payments made in conjunction with the employee's pay. In other words the employee is entitled to double-dip.

Public Holidays

The new Act provides that all employees are entitled to 11 paid public holidays each year if the holidays fall on days the employee would ordinarily work. It also make for provision for such employees to agree to work on public holidays. Where an employee works on a public holiday the employee is entitled to be paid at the rate of time and a half for the time worked on the holiday irrespective of whether the public holiday falls on an ordinary working day for the employee or not.

When the employee works on a public holiday falling on a normal working day for the employee, the employee is entitled to a paid day off in lieu. However, where the public holiday falls on a day on which the employee doesn't normally work, there is no entitlement to a paid day off in lieu.

All agreements entered into after 1 April 2004 must expressly provide for rate and a half to be paid for time worked on public holidays and current agreements must be similarly amended at the earlier of when next amended or 31 March 2005. Please note that Vegfed and the NZ Orchard and Vineyard Association of Employers have updated standard contracts.

Paid Sick Leave

This entitlement applies to an employee after the completion of 6 months continuous service or to an employee who has, over a period of 6 months, worked for an average of at least 10 hours per week for not less than one hour in every week or 40 hours in every month during that period. Once the employee qualifies and for each year in respect of which they continue to qualify, they are entitled to 5 days sick leave, which may also be used for a domestic situation whereby the employee's spouse or a person who is dependent on the employee is sick or injured. Employees are entitled to carry forward unused sick leave in any year until they have accumulated 15 days (maximum entitlement 20 days). They are not entitled to payment for this on leaving the employment.

Employers are entitled to require medical proof of sickness where the illness or injury giving rise to the leave is for 3 or more consecutive days, irrespective of whether or not these would be working days for the employee.

Paid Bereavement Leave

This entitlement, like sick leave, is available after an employee completes 6 months continuous service or where the employee has, over a period of 6 months, worked for an average of at least 10 hours per week for no less than one hour in every week or 40 hours in every month during that period.

Bereavement leave of 3 days is available to qualifying employees when they suffer the bereavement of a spouse/partner, child, brother or sister, grandparent, grandchild or a spouse/partner's parent. Bereavement leave of 1 day is available where the employer accepts that the employee has suffered a bereavement as a result of the death of any other person. In determining whether the employee has suffered such a bereavement the employer must consider at least the following:

Calculating the Pay for a Public Holiday, Day in Lieu, Sick Leave or Bereavement Leave

The Act defines the meaning of relevant daily pay for the above purposes. Another definition is provided for the purposes of calculating annual holidays. A day's pay is defined as the amount of pay the employee would have received had the employee in the ordinary course worked on the day including productivity or incentive based payments, payments for overtime if those payments would have otherwise been received on the day and the cash value of any board or lodgings provided to the employee.

The Act goes on to provide that should it not be possible to determine an employee's relevant daily pay in accordance with the above definition then the payment must be determined on the basis of the amount earned for the four calendar weeks before the end of the pay period immediately before the calculation is made (or longer period if the pay period is longer than four weeks), divided by the number of whole or part days the employee worked during that four week period (or longer) including days the employee was on paid holiday or paid leave.

The Act makes provision for an agreement to specify a set amount covering this but this must be equal to or greater than what would result from the above calculation and so growers wishing to take up this option would need to satisfy themselves that they comply by either running dual calculations or building in a margin that ensures employees are not disadvantaged.

Calculating Annual Holiday Pay

The Act, in general, provides that Annual Holiday Pay is paid at the greater of the employees "ordinary weekly pay" at the beginning of the holiday or the employees "average weekly earnings" for the 12 months immediately before the end of the last pay period before the holiday. "Ordinary weekly pay" is defined as the pay for an employee's ordinary working week under his or her employment agreement including productivity or incentive rates that are a regular part of the employee's pay, payments for overtime if overtime is regularly worked and the cash value of any board or lodgings provided. Expressly excluded are productivity or incentive payments that are not a regular part of the employee's pay, irregular overtime, exceptional payments and any discretionary payments (non contractual).

If it is not possible to determine the employee's ordinary weekly pay in this manner then it must be determined on the basis of the gross pay earned for the four calendar weeks before the end of the pay period immediately before the calculation is made (or longer period if the pay period is longer than four weeks), less the value of the items expressly excluded (see paragraph above) divided by 4 weeks.

The Act makes provision for an agreement to specify a set amount covering this, but this must be equal to or greater than what would result from the above calculation. "Average weekly earnings" means 1/52 of an employee's gross annual earnings. Gross earnings include all payments the employer is required to make to the employee such as salary or wages, allowances, payments for annual holidays, sick leave, bereavement leave, productivity incentives, payments for overtime and the first week of compensation payable under ACC. Expressly excluded are discretionary payments, ACC payments after the first week of absence, payments for absence from work while the employee is on protected voluntary service or training within the Voluntary Protection Act 1973 and any reimbursement payments.

Holiday and Leave Records

The Act requires that employers keep a comprehensive holiday and leave record that complies with the Act.

Penalties

An employer who fails to comply with the requirements of the Act is liable to a penalty of $5,000 if an individual or $10,000 if a company or body corporate.

What do growers have to do?

From 1 April 2004 they will need to comply with the Act. For example growers will have an obligation when employing new employees to inform them of their entitlements under the Act and also that they can obtain further information by contacting their union or the Department of Labour.

The Department of Labour will be able to assist growers with any enquiries.