Reconciling flexibility with consistency

Kerryn Douglas, Payroll Specialist with Pay Check, asks how we can reconcile the demands for flexibility while upholding clear and consistent employment standards.

What do you think of when you read these two words: flexibility revolution?

The term ‘flexibility revolution’ might conjure up images of the plethora of yoga studios cropping up across our urban landscapes. But, in the current workforce vernacular, it represents a profound change in how employees manage their working hours.

Today’s professionals are increasingly demanding flexible work arrangements, blending remote work with time at the office, a hybrid model that has rapidly gained traction. Many employees now work from home in casual comfort, swapping traditional office attire for pyjama pants and slippers while they tackle their daily tasks.

BENEFITS, BUT HOW?

This dramatic shift from the conventional 9-to-5 workday presents challenges in defining a typical workweek or workday, particularly when considering compliance with the Holidays Act 2003. How can we reconcile the demands for flexibility with the need to uphold clear and consistent employment standards?

Working from home presents numerous benefits that enhance the quality of life for employees while also offering substantial advantages to employers. By fostering flexibility, reducing costs, and improving productivity and satisfaction, remote work is increasingly becoming a preferred and effective model for modern organisations. It is clear, however, that our current legislation does not always mean adherence to compliance is easy.

IT’S COMPLEX

Consider an employee who has the freedom to spread their 40-hour work week across any work days they choose. In this flexible arrangement, if they fall ill or need to care for a sick dependant, they often end up working around their sick leave. Unlike their officebound counterparts, who might take a full sick day off, these employees tend to make up the hours later, diluting the benefits of their sick leave.

This issue highlights a critical challenge in the flexibility revolution: without clearly defined workdays, it’s harder to standardise leave entitlements. Establishing specific workdays creates a baseline that ensures all employees, regardless of their work arrangement, receive equitable leave benefits.

As flexible work arrangements become the norm, payroll management faces new complexities, particularly in handling leave entitlements for employees with variable schedules. While the benefits of a four-day workweek are well documented, the trend is shifting towards even more fluid arrangements, allowing employees to finish early on Fridays or bank extra hours to enjoy entire days off or working a blend of different hours on different days of the week.

DEVIL’S IN THE DETAIL

This flexibility, however, complicates the calculation of leave entitlements. When employees take leave for family violence, bereavement, alternative leave or sick leave (commonly known as FBAPS), the legislation mandates that we pay their relevant daily pay (RDP). Essentially, what the employee would have earned, had they worked that day. In a traditional setup, calculating this is straightforward. But with varying hours and days worked each week, determining RDP becomes challenging. Flexibility in scheduling must be balanced with the need to provide fair and consistent leave benefits, ensuring compliance while accommodating modern work preferences.

When it’s impractical or impossible to determine an employee’s RDP – or if their daily pay varies within the pay period during which their holiday or leave falls – organisations can opt for paying the average daily pay (ADP) method under section 9A(i) of the Holidays Act 2003. While ADP provides a practical alternative, it can sometimes disadvantage employees who have worked inconsistent hours, such as half days, over the past 52 weeks. In these cases, ADP may result in a lower payment than if the employee had a defined schedule with clear expectations for hours worked each day.

The challenge lies in balancing the flexibility of modern work arrangements with the need for fair and consistent leave compensation. Clear scheduling expectations could help mitigate this issue, ensuring employees receive equitable pay for their leave while preserving the benefits of a flexible work environment.

CLARITY IS IMPORTANT

In the intricate world of annual leave compliance, one challenge stands out: determining what constitutes a ‘week’. Under the Holidays Act 2003, the unit of time for annual leave entitlements is weeks. Thus, to ensure compliance, we must establish a clear definition of a week.

This clarity is essential for providing employees with their minimum entitlement of four weeks of annual leave. Without a precise understanding of the weekly timeframe, meeting legal obligations and safeguarding employee rights becomes a complex task.

In the realm of fluctuating workweeks, a prudent approach is to lean towards caution, particularly when determining the number of hours or days worked. By erring on the side of fewer hours or days, employees still reap the advantage of receiving the higher of either their ordinary weekly pay or the average weekly earnings, where the latter is influenced by any earnings over the defined week.

However, opting for a higher number of hours as the contracted hours introduces a conundrum: consistently paying the employee for their contracted hours. This predicament underscores the delicate balance between adhering to contractual obligations and managing the intricacies of variable work arrangements, not to mention the significant fiscal implications of any missteps in this regard.

Holding Onto Hope

As we navigate this new era of work, achieving equilibrium between flexibility and regulatory clarity is paramount for both employers and employees. The muchawaited revisions to the Holidays Act 2003, often anticipated but yet to materialise, may finally usher in a more balanced approach, tailored to our flexible workforce.

Let’s hope that, whatever the approach, it’s grounded in common sense, applicable to real-world scenarios and truly mirrors the dynamics of our modern workforce.

Kerryn Douglas has more than 20 years of payroll processing experience. She has delivered payroll training via CCH, TEO, NZPPA, SIT, Elephant HR Training Group and HRINZ and prides herself on keeping up to date with current payroll legislation. With a Diploma in Human Resource Management, NZIM Diploma in Management, Post Graduate Certificate in Management and an NZPPA Certificate in Payroll Processing, Kerryn applies a holistic approach to her client’s needs helping to create effectiveness and efficiencies in the administration of payroll.