Holidays Act guidance – annual holidays and entitlements

20th July, 2017

Over the last 12 to 18 months we’ve seen a number of businesses fall foul of the Holidays Act 2003 – and it’s mostly because there’s just not enough detail or guidance available.

For businesses with employees who work pretty consistent hours each week then applying the legislation is fairly straight forward.

However, there has been a significant increase in the number of businesses whose staff have variable or flexible working arrangements, and that’s where it can get tricky.

The good news is that The Ministry of Business, Innovation and Employment (MBIE) has published new guidance intended to help employers and their employees navigate legislation relating to the Holidays Act 2003.

The guidance document is being released in two parts.

The first section of the guidance covers Annual holidays, Entitlements on Finishing Employment and Annual Closedown Periods as well as some key steps for reducing the risk of non-compliance.

Here’s a snap shot of some of the key messages for employers to reduce the risk of non-compliance:

Employers should engage with their employees in good faith on the issue of provision of the minimum entitlements (and the relevant payment for them)

This is especially important when it’s not clear and a judgement needs to be made.

Some annual holidays provisions require specific agreement with employees. Employers educating their employees about their minimum entitlements will also support compliance and assist identification of issues relating to holidays and leave.

Employers must respond to changes in employees’ work patterns

Employers (and their payroll staff or providers) need to be aware of any permanent or temporary changes to an employee’s agreed work pattern. Sometimes these changes might not be immediately obvious.

They must discuss these changes, and their implications for the provision of the Act’s entitlements – particularly the annual holiday entitlement – in good faith and in a timely manner.

READ: More resources for employers

Employers must keep accurate records for each of their employees that are compliant with the requirements in both the Employment Relations Act and the Holidays Act

This includes having a record of the hours worked each day in a pay period by each employee and the pay received for those hours.

Employers need to ensure that their payroll systems and processes (whether internal or third-party) are fit-for-purpose

It’s the employer’s responsibility to provide their employees with their holidays and leave entitlements in accordance with the Act.

Therefore it’s the employer’s responsibility to ensure the payroll system they use calculates entitlements and pay in accordance with the Act.

READ: More resources on payroll

Employers need to ensure that payroll has all the relevant information from across the business to correctly calculate their employees’ entitlements and pay

It’s the employer’s responsibility to provide their employees with the minimum entitlements in accordance with the Act.

This means it’s the employer’s responsibility to ensure that payroll receives, on an ongoing basis, all the relevant information from across the business (eg from HR, line managers, the employees themselves).

This is especially important for employees whose hours/days and pay vary.

Employers may want to err on the side of caution

In many cases there is no single ‘correct’ answer as to what the minimum entitlement or pay is.

If there is more than one choice for calculating entitlements, the ones that are more favourable to the employee may significantly reduce risk and, potentially, the compliance costs associated with trying to determine the minimum.

The second part of the guidance documents will focus on public holidays, alternative holidays, sick leave and bereavement leave and will be available on from October 2017.


For more information on MYOB’s Payroll solutions head to Compare MYOB Payroll