The tangled web of leave

THE TANGLED WEBof leave

Fiona Mines, HealthyPractice advisor at MAS, delves into the complex legal obligations behind holiday, annual and other leave.

AS WE EMERGE from winter and look forward to longer days and warmer weather, many people are planning their summer holidays and working out how much annual leave they’ll need.

Their plans are likely to be more important than ever this year, given the stress and uncertainty caused by the COVID-19 pandemic. The lockdown and other restrictions might have forced them to abandon holidays booked for earlier in the year, and everyone could use a break.

But what exactly are the rules and regulations relating to annual leave? How much are employees entitled to; how does it accrue; and as an employer, what are your obligations?

The employment agreements you’ve signed with your team should outline their annual leave entitlements. By law they’re entitled to a minimum of four weeks’ leave after they’ve been employed continuously for 12 months. Note that a ‘week’ is defined as an employee’s ordinary working week – so an employee who works three days a week is entitled to four weeks’ holiday of three days each, or 12 days a year.

Most employers allow new employees to take leave as it accrues during the first 12 months. However, be careful about allowing an employee to take significantly more leave than they have accrued, as you could be left out of pocket if they decide to quit. It’s a good idea to have a signed agreement between you and the employee that allows you to deduct any leave taken in advance from their final pay.

The rules on holiday pay can be complex, and even large organisations can get them wrong. In recent years some of New Zealand’s highest-profile employers – including the Ministry of Business, Innovation and Employment, Restaurant Brands, New Zealand Police and Bunnings – have miscalculated holiday pay entitlements for their employees.

If you have permanent employees, you’re obliged to pay them holiday pay either at their ordinary pay rate or based on their average weekly earnings in the previous 12 months – whichever rate is higher.

For casual employees or people employed for a fixed term of less than 12 months, you may pay holiday pay as part

of their regular pay at a minimum rate of eight percent of their gross earnings.

Slightly different rules apply to an employee returning from parental leave for the first 12 months after their return to work. Rather than being paid at their ordinary pay at the time they take leave, their holiday pay is calculated at the rate of their average weekly earnings in the 12 months immediately before their leave is taken. As their average weekly earnings includes a period of unpaid parental leave, their holiday pay is less than their ordinary pay, unless the employer chooses to pay their higher ordinary pay.

It can be challenging to calculate annual leave and holiday pay entitlements for new parents and employees with irregular or changing work patterns. We suggest you visit the Employment New Zealand

HealthyPractice

If you own or manage a veterinary practice, MAS’s HealthyPractice online business support service has been designed especially for you. It provides information and templates on all areas of employment and management – all backed by MAS’s business hours’ advice and support. Visit www.healthypractice.co.nz to find out more or call the MAS HealthyPractice team on 0800 800 627 for a free trial and website tutorial.

website (www.employment.govt.nz/ leave-and-holidays) for help.

It’s also important to have a clear process for annual leave applications – especially for popular holiday periods such as Christmas, New Year and Easter, when you may have to balance competing leave requests with minimum staffing requirements. Make sure you have a clear leave policy and application process so that everyone is treated fairly.

If you have any questions on leave or other aspects of running your business, feel free to call the HealthyPractice team on 0800 800 627 or email business@mas.co.nz.

This article is of a general nature and is not a substitute for professional and individually tailored business or legal advice. © Medical Assurance Society New Zealand Limited 2020.