New Zealand: Employment Court decisions reinforce urgent need for Holidays Act reform

The latest decisions from the Employment Court on the outdated Holidays Act 2003 (Act) reinforce our view that significant change to New Zealand’s holiday pay system must be treated as a matter of urgency by the Government.

Our employer clients have consistently ranked this issue as their top employment law priority, but reform continues to stay off the immediate legislative agenda.

Recent Employment Court cases

So far this year the Employment Court has had to sit as a full Court on two occasions to consider complex holiday pay issues. A variety of other cases have also recently been before the Authority and Court on how to interpret and apply the Act.

Notwithstanding the fact that the Act was introduced in 2003 (and based on 1981 legislation), it is clear that there are still fundamental areas of uncertainty around how holiday pay obligations should be calculated (and paid) by employers. Two recent cases from the Employment Court highlight the need for certainty and greater clarity around specific areas – including:

  • Whether commission paid to employees should form part of ‘ordinary weekly pay’ under section 8(2) of the Act for holiday pay calculations[1];
  • How holiday pay should be calculated under section 9 of the Act when employees take public holidays, alternative holidays, sick leave and bereavement leave[2].

Government taskforce

While it was a welcome step for the Government to announce a Holidays Act review and associated Taskforce in May last year, it was disappointing earlier this month that the Minister for Workplace Relations and Safety approved another extension (till the end of September) for the Taskforce’s final recommendations.

RNZ also recently reported that payroll companies say they are being excluded from the Taskforce’s review, and that their advice is being ignored.[3] If this is the case, then it is surprising and concerning, considering the significant impact any reforms will have for employers and payroll providers.

Where to from here?

If the Taskforce’s report in September does not recommend urgent and significant reform of the Holidays Act regime, this will be a serious setback for the NZ labour market.

Employers and employees alike are poorly served by the anachronistic and overly complex current laws. No one is suggesting that it is easy to find a workable solution – but treating reform as a matter of urgency is in the best interests of all working New Zealanders.