Ace Payroll: Holidays Act 2003




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Holidays Act 2003

Updated 20th April 2004

The Holidays Act 2003 was passed on 17th December 2003.

This is the full text of the Holidays Act 2003 which comes into force on 1st April 2004.

If you have any questions about the new Act, feel free to email us - remember to quote your serial number.

What happens to unused sick leave owing on 1st April 2004?

Anzac Day this year falls on a Sunday and is observed that day. Monday is not a public holiday.

Can alternative holidays be taken over a number of days?

If I have someone working on a public holiday and they start at 10pm on the public holiday and work till 5am do I have to pay them at time and a half for the whole day?

What happens to lieu days owing as at 31st March 2004?

Does the time and a half payment for working on a public holiday start on 1st April 2004 or 2005?

I read that under the new Holidays Act an employee can sell a holiday day back to an employer? Is this true?

Can an employment agreement require medical certificates for all sick leave?

As an employer do I get to decide whether an employee has suffered a bereavement?

The new Holidays Act states that after 12 months you can replace an alternative day with a payment. How is this payment amount calculated?

If an employee does not normally work on the day that the Public Holiday falls but works the Public Holiday are they entitled to an alternative holiday?

In the Holiday Act 1981 a statutory holiday for factory workers was based on the last 14 days and 1/10 for each day worked up to the stat day. Does this apply to the new act too?

Christmas and Boxing Day this year fall on a Saturday and Sunday. Which days are public holidays?

When does the time and a half pay rate for days in lieu take effect and is there a system in Ace for keeping track of lieu days earnt before 1 April 2004 and those earnt after?

I imagine some people think unlimited bereavement leave starts the day they are employed. That is not correct is it?

I am using the 6% of gross method for holiday pay. Do I have to change this to 8% on 1st April 2004?

Bereavement Leave

Transition

Until 31st March 2004 bereavement leave is included in special leave under section 30A of the Holidays Act 1981.

From 1st April 2004 bereavement leave is specifically provided for by the new Act.

Summary

There is no entitlement until after 6 months service. Section 63.
After 6 months, there are two different bereavement leave entitlements. Section 69.
On each death of a family member, the employee is entitled to 3 days paid leave. Section 69(2)(a).
On the death of every other person from which the employee feels bereaved, they are entitled to 1 day paid leave. Section 69(2)(b).
There is no maximum or cumulative entitlement. The employee is entitled to leave for every bereavement. Section 70.

More detailed explanations of the above, together with guides to the new features in Ace Payroll, will be published shortly.

Sick Leave

Transition

Until 31st March 2004 sick leave is included in special leave under section 30A of the Holidays Act 1981.

From 1st April 2004 sick leave is specifically provided for by the new Act.

Summary

As with the old Act, there is no entitlement until after 6 months service. Section 63.
If sick leave is paid in advance, section 63(3) says it can be deducted from future entitlements. This sorts out the anomaly of the old Act described in our article Sick leave paid in first six months employment is a gift and cannot be deducted from later entitlements
The entitlement remains at 5 days every year, after 6 months service. Section 65.
Any unused sick leave accumulates to a maximum of 20 days. Section 66.
Unused sick pay on termination does not need to be paid out. Section 67.
An employer cannot request a medical certificate unless an employee is sick "for a period of 3 or more consecutive calendar days, whether or not the days would otherwise be working days for the employee." Section 68

More detailed explanations of the above, together with changes to the relevant features in Ace Payroll, will be published shortly.

Holiday Pay

Transition

Until 31st March 2004 holiday pay is handled in accordance with the Holidays Act 1981.

From 1st April 2004 holiday pay is covered by the new Act.

Summary

From 1st April 2007 an employee is entitled to 4 weeks a year. Section 41
Until that date, the existing entitlement to 3 weeks a year remains unchanged. Section 16

Apart from the above, there are no major changes to holiday pay, but there are many minor changes as to how holiday pay is calculated.

These will be documented in detail elsewhere on this website over the coming weeks.

Public Holidays

The major change here is that an employee must be paid time and a half, plus receive a day in lieu, for working on a public holiday. Section 50
The number of public holidays remains at 11 per year. Section 43
The new Act refers to days in lieu as alternative holidays. Section 56
Entitlement to alternative holidays remains until taken, and must be paid out on termination. Section 60
If an alternative holiday has not been taken in the 12 months after it became due, the Act allows the employee to "sell" the day back to the employer. Section 61

In the short term, we shall clarify how to pay an employee time and a half in Ace Payroll, and allow an alternative holiday.

Later this year we shall completely rewrite our public holiday features, to assist clients with the additional complexity introduced.

Questions We Have Been Asked

I am using the 6% of gross method for holiday pay. Do I have to change this to 8% on 1st April 2004?

You do not have to make any changes to holiday pay till 2007.

The 6% of gross method is used as a simplified method of holiday payment, and gives a result exactly in accordance with both the old and the new holidays acts, for all employees with less than a years service.

The 6% changes to 8% in 2007, when 4 weeks annual holidays becomes the legal minimum.

For a definitive legal reference see Schedule 1 of the Holidays Act 2003

I imagine some people think unlimited bereavement leave starts the day they are employed. That is not correct, is it?

There is no bereavement leave entitlement until after 6 months service.

This is provided for by both the old Act, and Section 63 of the new Act.

When does the time and a half pay rate for days in lieu take effect and is there a system in Ace for keeping track of lieu days earnt before 1 April 2004 and those earnt after?

Section 50 of the new Act requires that an employee must be paid time and a half for the time worked on a public holiday, plus receive a day in lieu.

Payment for the time worked must be at time and a half.
Payment for the day in lieu is at ordinary pay rates.

Accordingly the payment status of lieu days has not changed, and it is irrelevant whether the entitlement arose before or after 1st April 2004.

Christmas and Boxing Day this year fall on a Saturday and Sunday. I understand that in this case, Monday and Tuesday become the public holiday. In my business, the staff will work on all four of these days. Do I have to pay them time and a half for the Saturday and Sunday, or the Monday and Tuesday, or both?

First, determine which of the days would be a normal working day for the employee if it were not Christmas. Once determined, the following applies

If the same staff member usually works all four days, Saturday and Sunday are the public holiday. For working those two days you pay time and a half, plus allow the two days in lieu. For them, Monday and Tuesday are not public holidays.
If a staff member works just the Saturday and Sunday, just the Sunday and Monday, or just the Monday and Tuesday, then in all three cases, both days are public holidays. Pay time and a half and allow a day in lieu for each day worked.
If a staff member usually works three of the days, one day is at usual pay, and the other two are at time and a half plus a day in lieu.
If an employee would only usually work one of the days between Saturday and Tuesday, then irrespective of which day it is, it is to be treated as a public holiday.

This is covered by Section 45 which has changed the handling of the four public holidays at Christmas and New Year.

Section 45
Transfer of public holidays over Christmas and New Year

(1) For the purposes of this subpart, if any of the public holidays listed in section 44(1)(a) to (d) (christmas and new year)

(a) falls on a Saturday and the day would otherwise be a working day for the employee, the public holiday must be treated as falling on that day:

(b) falls on a Saturday and the day would not otherwise be a working day for the employee, the public holiday must be treated as falling on the following Monday:

(c) falls on a Sunday and the day would otherwise be a working day for the employee, the public holiday must be treated as falling on that day:

(d) falls on a Sunday and the day would not otherwise be a working day for the employee, the public holiday must be treated as falling on the following Tuesday.

(2) To avoid doubt, this section does not entitle an employee to more than 4 public holidays for the days listed in section 44(1)(a) to (d) (christmas and new year).

What this section effectively says is

If the Christmas or New Year holidays fall on a Saturday or Sunday, and the employee normally works on a Saturday or Sunday, then the Saturday or Sunday are public holidays.
If an employee does not usually work on the Saturday or Sunday, then the public holidays are the following Monday or Tuesday.

The old Section 9 of the Holidays Act 1981 , which the new Section 45 has replaced, effectively meant that in the circumstances you describe, the Saturday and Sunday would never be public holidays, and the Monday and Tuesday always were.

Whilst this was fine in the old 40 hour five days a week business environment, it had some unusual side effects in today's 24/7 society. If an employee usually worked Saturday and Sunday, and never worked Monday and Tuesday, under the old Act, the employee would have to work Christmas and Boxing day, receive no additional pay, and not be entitled to the Monday and Tuesday as public holidays.

It is this scenario that the new Section 45 has endeavoured to correct.

In the Holiday Act 1981 a statutory holiday for factory workers was based on the last 14 days and 1/10 for each day worked up to the stat day. Does this apply to the new act too - it isn't mentioned in the red folder that was sent to everyone.

No, this no longer applies after 1st April 2004.

You are referring to the old Section 25 Holidays Act 1981

This section has not been replaced in the new Act.

It's removal is acknowledged in the Minister of Labour's press release of 17th December 2003. We quote from the public holidays section of that press release:

6.The separate provisions for rate of pay for working on a public holiday in "factories and undertakings" are removed as the distinctions are irrelevant in today's environment.

The distinction between factories and undertakings and other types of employment is historic and irrelevant in today's environment. Under the Bill all workplaces will be treated the same.

If an employee does not normally work on the day that the Public Holiday falls but works the Public Holiday are they entitled to an alternative holiday?

In this situation, the employee must be paid time and a half for the time worked on the Public Holiday, but is not entitled to an alternative holiday.

This is set out in Section 48(1)(b) which we repeat here for clarity:

(1) If a public holiday falls on a day that would not otherwise be a working day for an employee, section 46 (entitlement to public holidays) is complied with if

(a) the employee does not work on the day; or

(b) the employee works on any part of the day and the employer pays the employee in accordance with section 50 (time and a half for time worked).

Think of it this way. The employee has not "lost" their paid public holiday, because they did not have it to begin with. Because they have not lost their paid public holiday, you are not required to give them an alternative paid holiday to replace it.

The new Holidays Act states that after 12 months you can replace an alternative day with a payment. How is this payment amount calculated?

Thank you Judith - a very interesting question.

If a public holiday falls on a day that would otherwise be a working day for an employee, and the employee works on any part of that day, the employee must be paid time and a half for the time worked on the public holiday, and be provided with an alternative paid holiday. (Section 56)

This day can be taken during the next twelve months at the request of the employee (Section 57) and after twelve months at the insistence of the employer (Section 58)

If not taken by the employee, it must be paid out on termination (Section 60)

After twelve months the employee can request the day be exchanged for payment. You are asking how that payment is calculated.

Let's look at Section 61 of the legislation. We added the bold underlines - they are not part of the legislation.

Section 61
Alternative holiday may be exchanged for payment

(1) An employee may request the employer to exchange the employee's entitlement to an alternative holiday for a payment.

(2) A request under subsection (1)

(a) may be made only if 12 months have passed since the employee's entitlement to the alternative holiday arose; and

(b) may be made whether or not the employee has been required to take the alternative holiday under section 58 (employer insists on taking).

(3) If the employer agrees to the employee's request, the employer must pay the employee the amount agreed between the employer and the employee in exchange for the alternative holiday.

(4) The employer must make the payment for the alternative holiday as soon as practicable after the employer has agreed under subsection (3).

Note the employer cannot "replace" the day with a payment - it is up to the employee to request it.

Once requested, the payment is entirely open to negotiation, and could have been agreed to in advance in a written employment agreement.

A good starting point for negotiation is an employee's usual daily pay.

On the help message in your bereavement leave routine, it seems to suggest I should pay somebody for one day if they feel "reasonably bereaved". Surely I have some sort of say in whether this is justified or not? The Department Of Labour mailout seems to suggest I get to determine whether it is reasonable or not.

Yes, you are right. The Dept Of Labour Quick Guide for Employers (Feb 2004) says

The employee is entitled to one day's leave for the death of any person if the employer accepts that the employee has suffered a bereavement.

The single day's bereavement leave for a non family member is covered by Section 69(2)(b). Note the relevant factors in 69(3) which guide your say as to whether the bereavement is justified.

(b) on the death of any other person if the employer accepts, having regard to relevant factors such as those set out in subsection (3), that the employee has suffered a bereavement as a result of the death.

(3) For the purposes of subsection (2)(b), relevant factors include

(a) the closeness of the association between the employee and the deceased person:

(b) whether the employee has to take significant responsibility for all or any of the arrangements for the ceremonies relating to the death:

(c) any cultural responsibilities of the employee in relation to the death.

In my employment contracts, I currently specify that a medical certificate is needed for sick leave to be taken. I understand that Section 68, Subsection 1 specifies that a medical certificate is required after 3 consecutive days of illness, but, Subsection 2 of Section 68 seems to suggest that if I specify something else in an employment contract, it overrides Section 1. Is this correct?

That is not our understanding of Section 68 (proof of sickness or injury).

Our understanding of subsection 2 is that if you allow more than 5 days a year sick leave, your employment agreement can require a medical certificate for all absences that are in addition to the 5 days a year legal minimum.

Let's have a look at the legislation. We have highlighted the two relevant sections, and added the underlines and bold - they are not in the legislation itself.

Section 68
Proof of sickness or injury

(1) An employer may require an employee to produce proof of sickness or injury for sick leave taken under section 65 (five days a year sick leave) if the sickness or injury that gave rise to the leave is for a period of 3 or more consecutive calendar days, whether or not the days would otherwise be working days for the employee.

(2) Subsection (1) does not prevent an employer and employee from agreeing that the employee will produce proof of sickness or injury for sick leave provided to the employee in addition to the entitlement set out in section 65.

(3) For the purposes of this section, proof of sickness or injury may include a certificate from a medical practitioner (within the meaning of the Medical Practitioners Act 1995) that

(a) the employee is not fit to attend work because of sickness or injury; or

(b) the employee cannot attend work

(i) because the employee's spouse is sick or injured:

(ii) because a person who depends on the employee for care is sick or injured.

(4) To avoid doubt, this section does not prevent an employer who is otherwise legally authorised to so require, from requiring an employee to establish that there are no relevant health and safety reasons or hygiene reasons that would prevent the employee from working.

I read that under the new Holidays Act an employee can sell a holiday day back to an employer? Is this true?

The only sort of day that can be "sold back" to an employer is an Alternative Holiday, previously called a Lieu Day. The day must have arisen through the employee working on a public holiday, and not taken the day allowed within 12 months of falling due.

Alternative Holidays are covered from Section 56 onwards, and the provision to sell an Alternative Holiday is Section 61.

Annual Holidays cannot be exchanged for payment. Section 16 covers the entitlement to annual holidays, and subsection 4 quite clearly states

(4) An employee's entitlement to annual holidays remains in force until the employee has taken all of the entitlement as paid holidays.

This may have implications for those employers with "use it or lose it" clauses in their Employment Agreements relating to annual holidays.

One of the Directors of my company reckons the payment of time and a half for working on a public holiday comes in on 1 April 2005, not 1 April 2004. Apparently he received a mailout that stated this. Is it true?

Payment of time and a half for working on a public holiday comes into force on 1st April 2004. See Section 2 (Commencement).

The only part that does not take effect on 1st April 2004 is the four weeks annual leave requirement. This takes effect on 1st April 2007.

For independent verification, see the holidays section of the Employment Relations Service Website.

We quote from that site

The new Act will affect every workplace differently. All employers will need to review their practices to ensure they meet the new requirements. This includes:

ensuring that they and their employees understand the public holiday provisions, which will apply from the Easter holidays in April 2004
ideally checking all employment agreements, and working through any required changes with employees or their unions
ensuring that records, holiday policies and procedures reflect at least the minimum provisions of the Holidays Act 2003
preparing to implement four weeks' annual leave from 1 April 2007

If an employee has lieu days owed at 1/4/04, relating to stat days worked in the period to 31/3/04 do these have to be paid out at the average daily rate under the new act or at the agreed employment agreement rate of an 8 hour day which was in force with our employees prior to March 31?

Neither is correct.

On 1st April 2004 any unused stat days become Alternative Holidays, and must be carried forward as required by Section 89.

Section 89
Transitional provision relating to public holidays

Any holiday to which an employee had, before the commencement of this section, become entitled under section 7A of the Holidays Act 1981 and that remains untaken on the commencement of this section

(a) remains in force despite the repeal of the Holidays Act 1981; and

(b) must be treated as if it were an alternative holiday which the employee is entitled to take, or to be paid for, in accordance with subpart 3 of Part 2.

When the Alternative Holiday is taken, it must be paid for as provided by Section 60.

Section 60
Payment for alternative holiday

(1) An employer must pay an employee not less than the employee's relevant daily pay for the day which is taken as the alternative holiday.

(2) Payment for an alternative holiday must be made

(a) in the pay that relates to the pay period in which the alternative holiday is taken; or

(b) if the employee has not taken the alternative holiday before the date on which his or her employment ends

(i) at the rate of the employee's relevant daily pay for his or her last day of employment; and

(ii) in the pay that relates to the employee's final period of employment.

Relevant Daily Pay is a term defined by Section 9 of the Act, and "means the amount of pay that the employee would have received had the employee worked on the day concerned"

In other words, for lieu days accrued up to 31st March 2004, you must pay the employee their usual wages for the day on which they take their alternative holiday.

If I have someone working on a public holiday, and they start at 10pm on the public holiday and work till 5am, do I have to pay them at time and a half for the whole day?

In the circumstances you describe, and in the absence of an Employment Agreement that provides something different, you are required to

Pay the employee time and a half for the 2 hours between 10pm and midnight.
If the day of the public holiday is a usual working day for the employee, you must allow the employee an Alternative Holiday for working on the public holiday.
For the time between midnight and 5am, you pay ordinary rates.

Section 50
Employer must pay employee time and a half for working on public holiday

(1) If an employee works (in accordance with his or her employment agreement) on any part of a public holiday, the employer must pay the employee at least the portion of the employee's relevant daily pay that relates to the time actually worked on the day plus half that amount again.

(2) This section is subject to section 51 (Transitional provision for employers who already pay for work on public holidays in employee's regular pay).

In this 2005 case the court made an express declaration that the expression "another day", as set out in section 44(2) (days that are public holidays) may be defined by employers and employees as a continuous 24-hour period running to and from a time other than midnight to midnight, provided that it is consistent with legislation and compliant with section 44(3) so that it does not diminish the total number of paid holidays that would otherwise be available to an employee in a year. This is recognition of a move away from the traditional Monday-Friday 9-5 working week.

I have a staff member who earned a lieu day working on a public holiday that fell on a Monday. Normally on a Monday they work from 8am - 12noon. She wishes to use this lieu day on a Friday. Also a day where she works from 8am -12 noon. If she uses this lieu day on a Friday does she use half of it or all of it. Also, if she uses it on a Tuesday when she normally works 8am - 5pm, does she use all of it. I really hope this makes sense.

Under the Holidays Act 2003 there is no such thing as a fractional lieu day.

There are some things in life you can either use, not use, but cannot half use. An Alternative Public Holiday is one of them. A voucher for a bungy jump is another.

The purpose of the law is to allow an entitlement to 11 public holiday days, as set out in section 43.

Section 43
Purpose of this subpart

The purpose of this subpart is

(a) to provide employees with an entitlement to 11 public holidays if the holidays fall on days that would otherwise be working days for the employee:

(b) to enable employees to agree to work on a public holiday in exchange for another day's paid leave.

If the employee works on a public holiday, then Section 56 requires you to provide an Alternative Holiday, to replace the day they could not take, because they worked on it.

An Alternative Holiday is, in effect, a substituted Public Holiday.

When the day is ultimately taken, Section 60 requires you to pay the employee their normal wages for the day taken.

Put another way, an Alternative Holiday arises because the employee had to work on a day that for them, would have been a Public Holiday.

In return for that, you have given them entitlement to a different Public Holiday of their choice - the Alternative Holiday.

When it is taken, the employee is paid in exactly the same way they would be if the Alternative Holiday day chosen by the employee was a Public Holiday, and they did not work.

Please can you confirm about Anzac Day. Is this now meant to be "Monday-ised" or is it still as it used to be, ie observed on the Sunday it falls on?

Section 44 (Days that are public holidays) specifies that ANZAC day is observed the day on which it falls, which this year is a Sunday.
The only public holidays that are not automatically observed on the days they fall are Christmas and New Year.

I understand that under the new act people can accumulate sick days, but what happens to days they are already owed at 1 April 2004? I would have thought it would start from zero, but it seems people keep their balance, and get a whole new 5 at their anniversary?

Any sick leave that remains untaken by the employee on 1st April 2004 is automatically accumulated under the new Act, as provided for by the following transitional provision

Section 90
Transitional provision relating to special leave

(1) Any special leave to which an employee had, before the commencement of this section, become entitled under section 30A of the Holidays Act 1981 and that remains untaken on the commencement of this section

(a) remains in force despite the repeal of the Holidays Act 1981; and

(b) must be treated as if it were sick leave which the employee is entitled to take in accordance with subpart 4 of Part 2.

(2) The operation of this section does not affect the date on which the employee next becomes entitled to sick leave.

Note the above section does not mean all an employee's sick pay is accumulated right back to when they started employment.

It means that if an employee has not taken all sick leave from their last sick leave anniversary that fell due, then any unused sick leave from the last anniversary is accumulated.