New MBIE Guide To Providing Annual Holidays

Geoff Bevan

The Ministry of Business, Innovation and Employment (MBIE) has recently released a guide to annual holidays under the Holidays Act 2003. This free resource is available here on the MBIE website.

Working out annual leave entitlements under the Holidays Act is reasonably straightforward if staff work fixed hours and receive the same pay each week. However compliance becomes surprisingly complicated and uncertain when working hours or pay vary from week to week, or work arrangements change. Many organisations (including MBIE itself) have got it wrong, resulting in some large pay outs and requiring significant time and cost to fix past issues and ensure compliance going forward.

While it doesn’t replace the law (or act as a substitute for legal advice) the guide provides some welcome assistance to employers and payroll providers around issues which are complex and difficult to get right.

Key messages

Some key messages for employers emerge from the guide. Although they don’t necessarily make happy reading, they are important to take on board:

The Act does not allow a “set and forget” approach. Where pay and hours vary, or work arrangements change, holiday pay calculations must be revisited to ensure they remain appropriate. Often they won’t.

In some cases (again, where hours or weekly pay varies) the right approach will not always be clear from the legislation. Judgment, professional advice and (often) discussion and agreement with the employee will be required.

An “unders and overs” approach does not work, and it will not all come out in the wash. If the employee sometimes receives more than they should and at other times less, MBIE will simply require the under payments to be made up and allow the employee to bank the extra money.

In the grey areas (and unfortunately there are quite a few) employers are less likely to get into trouble if they have made an honest effort to understand and comply with what the Act is trying to achieve, taken a consistent approach and negotiated and agreed the outcome with the employee.

Given the potential risks and the sometimes extensive cost of achieving exact compliance, MBIE also says that employers may save money in the long run by taking a more generous approach, even if they could arguably pay less under the Act. That’s obviously not a great message for employers but, in our assessment, it’s probably accurate.

MBIE expects to release a guide to public holidays, alternate holidays, alternate holidays, sick leave and bereavement leave in October 2017.

We have significant experience in these areas. If you have questions or issues then please get in contact with our employment team.

Geoff Bevan and Gerrad Brimble

New MBIE Guide To Providing Annual Holidays

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