The topic of employee wellbeing has grown louder over the last few years. Now, it’s about to be even louder.
While not officially law, the Holidays Amendment Bill has now passed its third reading and is currently awaiting Royal Assent, which means it’s safe to say that it’s on its way.
The Bill proposes that employees should be entitled to 10 days Sick Leave each year. However, the additional leave will have a staggered start. Once the law commences, employees will only receive the increased entitlement after their next entitlement date.
The implications this will have on employees and businesses have left a lot of people wondering what it all means.
What does it all mean?
Currently, under the Holidays Act 2003, an employee becomes entitled to 5 days Sick Leave:
- If they have been employed in current continuous employment with the same employer for six months; or
- An Employee’s hours of work are sporadic. They will have had to work with the same employer for six months for an average of 10 hours per week, including at least one hour a week or 40 hours a month.
An employee becomes entitled to an additional 5 days Sick Leave on their 12-month anniversary date from when they last become entitled to Sick Leave (their entitlement date). The maximum amount of Sick Leave that can be accumulated under the Holidays Act is currently 20 days.
Sick Leave can be used when the employee, their spouse, or someone who depends on them for care is sick or injured.
The simplest way to understand the new changes is that an employee would first become entitled to 10 days Sick Leave on their next entitlement date if their entitlement date falls on or after the legislation comes into force (mid-July 2021).
All other criteria concerning Sick Leave will remain the same such as:
- Employees will still need to be employed in current continuous employment with the same employer for six months.
- In cases where an Employee’s hours of work are sporadic, they will have had to have worked with the same employer for six months for an average of 10 hours per week, including at least one hour a week or 40 hours a month.
An employee will become entitled to a further 10 days Sick Leave on their 12 month anniversary from when they last become entitled to Sick Leave if their entitlement date falls on or after the legislation comes into force (mid-July 2021).
The maximum amount of Sick Leave that can be accumulated will remain at 20 days. For now, the payment for Sick Leave will also remain the same by using Relevant Daily Pay or average daily pay (if applicable). Employees will still not be entitled to be paid for any Sick Leave balance owing to them at termination.
The criteria for taking Sick Leave and proof of sickness will also remain the same.
According to the 2019 Workplace Wellness Report, the average employee has 4.5-5 absences a year. The report also found that 35% of New Zealand employees go to work sick. Not only have Kiwis been using up their sick days, but they’re also going to work unwell. This would indicate that the additional Sick Leave is likely to be taken by many employees, which increases costs for the employer, but may reduce the number of contagious people in the workplace spreading illness between workers.
Based on these findings, the Workplace Wellness report concluded that an increase in allocated Sick Leave could benefit businesses as it allows for a healthier workforce, therefore leading to a more productive environment.
What should employers be doing?
After the Bill is passed, employers will have approximately two months to prepare.
Employers should do the following:
Inform all employees of the increased Sick Leave entitlement.
- Look at payroll systems and ensure they are updated to account for the increased entitlement and the carry-over entitlement.
- Reword employment agreements to reflect the new Sick Leave policy changes (this is also an excellent opportunity to make sure the agreements are up to date). Note: If you are happy with your employment agreements as they are, you don’t need to update them for this change. The increased entitlement still applies as a matter of law.
- If you already offer additional Sick Leave as a contractual arrangement, you may wish to review the wording in the employment agreement to see if the new Sick Leave will be inclusive of what is already provided or will be additional. If the wording is for 10 days of Sick Leave, you may consider whether you wish to offer more than the statutory minimum, but there is no legal obligation to do so. If the wording in the employment agreement sets out that the employee is entitled to 5 extra days of Sick Leave, the employee is now entitled to 10 days (minimum statutory) plus 5 (contractual).
- Review and make adjustments to the business’s Sick Leave policy so that it matches the amendment.
Further changes to Sick Leave coming into effect in early 2022
Next year could potentially see the biggest change the Holidays Act 2003 has ever seen. Twenty-two recommendations are being considered, and these, if passed into law, will change the way all holidays are paid and change the way employers deal with leave.
The Government has started to implement the recommendations made by the Holidays Act Taskforce Team. Specifically relating to Sick Leave, the following recommendations are:
- Employees will be able to access some Sick Leave from the first day of employment with one day of Sick Leave entitlement available from the 1st day of employment. They will accrue an additional one day per month until the entitlement is met from day one of employment instead of the current practice of only being eligible for Sick Leave after six months of employment.
- The calculation for Sick Leave will also change where an employer will have to undertake two calculations. Sick Leave will be paid at the greater of Ordinary Leave Pay or Average Daily Pay over the previous 13 weeks.
- The deduction of sick days can be made in units of less than a day with a minimum of 1/4 of a day. The current practice is if an employee works for part of the day and they fall sick and go home, one day’s Sick Leave gets deducted, regardless of how many hours the employee had already worked on the day concerned.
We understand that any change to employment law can be disruptive and, at times, complicated. The team at Three60 Consult can guide and advise you through the Sick Leave policy amendment and ensure that your agreements and policies are healthy.
By Tasneem Begum, Minimum Entitlements Specialist