Holidays Act changes another burden for employers
Cost of changing murky law adds to string of new expenses for employers
Within the context of changes to the Holidays Act, it’s strange that the Government didn’t have the backbone to favour enduring simplicity.
$ 310 million per year; that’s the estimated cost of fixing the Holidays Act. It’s also a figure Workplace Relations Minister Michael Wood failed to mention earlier this week when he announced planned changes to the legislation that governs payrolls. Probably because it’ll fall to employers and it’s just a fraction of the extra expense Wood has heaped on that group recently.
Let’s hope it makes things better. For nearly two decades the current regime has spread a fog of confusion around leave and holiday entitlements, and spawned numerous lawsuits. A key problem has been employees shortchanged in annual holidays and associated pay.
It’s therefore notable that MBIE (in its regulatory impact statement) found the changes have only a “medium” likelihood of simplifying the current mess when it comes to annual leave. Which doesn’t promise a stellar outcome for revisions that have been gestating since May 2018, when the Cabinet agreed to establish a taskforce of business, union and government representatives to review the Act and recommend changes.
Crucially, if simplicity and clarity in the system was the priority then an hours-based method for calculating annual leave would be the clear winner and leave would accumulate at a set rate, for example, at 8 per cent for each hour worked (for salaried workers, this would apply to the hours set out in the employment agreement plus paid overtime). Leave use would also be measured in hours. MBIE’s assessment is plain: this is the “preferred option [when] simplicity is prioritised”.
In contrast, under the current system and enduring through the revisions the Government ultimately announced this week, annual holiday entitlements are calculated, taken, and paid in weeks or portions of weeks.
This involves considerable complexity for anyone whose work entails variable hours and pay arrangements.
Business and payroll providers have called loudly for the simple hours-based system. Even the Department of Internal Affairs, as a voice for the bureaucracy’s payroll providers, appears to favour the method (Cabinet papers note it called for more “certainty, transparency and practicality” than the Government’s planned changes to the Act promise.
The problem is that the unions don’t like it and therefore the Government’s taskforce could not agree to recommend it. The unions don’t like it because — while it would make most employees better off, and everyone would be able to get their heads around their own leave entitlements — it would make those who increase their hours and want to take annual holidays soon after, a little worse off.
And by comparison, it would make more employees worse off than sticking with the weeks-based method. Within the context of changes to the Holidays Act, it’s strange that the Government didn’t have the backbone to favour enduring simplicity.
After all, the suite of overall changes to the Act that it’s adopted still deliver an estimated total of $281m in other benefits to employees, including earlier and wider access to bereavement, sick and family violence leave, as well as more annual holiday pay for employees returning from parental leave.
And in the context of the broader labour market changes the Government has in train, the resistance to any employee disadvantage is more dogmatic still.
In the last six months alone, Minister Wood and Prime Minister Jacinda Ardern have confirmed that they will layer on an additional $2 billion in payroll costs, close to 2 per cent of the country’s salary and wage bill (MBIE based its cost estimates for the respective changes on the 2019 wage bill: $109b). All of that cost will be added to employers, while the benefit will flow to employees.
First there was the announcement by Ardern, during the election campaign last year, that in 2022 the Government will make Matariki a new public holiday. MBIE estimates the cost at $377m to $448m a year.
Immediately after the election, newly minted minister Wood introduced a bill to double employees’ minimum sick leave entitlement, from five days to 10. That’ll cost employers another $1b a year.
Hard on the heels of that announcement, the Cabinet pushed ahead with a 5.8 per cent hike to the minimum wage, scheduled for April 1, 2021.
The cost: $216m a year. This despite MBIE’s advice that Covid-19 effects on the economy remain highly uncertain, and that the Government should slash the contemplated wage hike down to an increase of just 1 per cent and delay implementation by six months to October this year.
The Government, however, pressed on. Intent on helping the “supermarket workers, cleaners and security guards” who have worked through Covid outbreaks, Wood said at the time.
The irony is that with each step the Government takes to execute its doctrine of unstintingly favouring employees, it pushes more determinedly on business, and employers generally, to reconsider their labour requirements. Somewhere there is a tipping point, where efforts that are intended to benefit workers will actually discourage additional hiring and hurt the very people the Government intends to help.