Every employee in New Zealand gets at least four weeks of paid annual leave (annual holidays) each year, intended to give employees a chance to rest and relax away from work. The annual leave entitlement comes into effect after 12 months of employment, unless you wish to allow some employees to take leave in advance of its accrual.
The date at which an employee can take annual leave is the first anniversary of their employment. However, there are some exceptions to this rule if, for example, your business has an annual closedown period (such as Christmas), or if an employee has taken unpaid leave of more than one week throughout the year.
Employers should be aware that employment agreements may stipulate a different amount of annual leave, and may also outline a different length of time employees must have served in the business before being allowed to take annual leave.
For permanent employees who work the same working week every week, on each anniversary of their employment this type of employee is entitled to four weeks of paid annual holidays. In the case of a regular pattern of work, the employee will have their annual leave accrued on a proportionate rate. For example, if an employee works three days per week their annual leave entitlement is 12 days per year.
Where you have employees that don’t work regular hours, or they do not do a regular week, determining a week for the purpose of their annual leave entitlement should be done using a number of days or hours in a week over a number of weeks.
If you have employees that are genuinely casual, with no expectation or prospect of regular or ongoing work, then you are entitled to agree to pay on a ‘paid as you earn’ basis, if specific conditions are met. In this case, an employee may be paid 8% of their gross weekly earnings on top of their pay as annual holidays if it is specified in their employment agreement and is made clear to the employee.
During their first year of employment, one of your employees may wish to take unpaid leave for a holiday or a break. If this happens, the annual leave entitlement is calculated as though the leave was on top of the year worked. For example, if an employee takes one week of leave without pay, the point at which they are able to get paid annual holidays can be pushed back by one week. Alternatively, you may feel the employee’s annual leave entitlement should not change based on their unpaid leave.
Employees are entitled to receive payment of their annual leave before this period starts, unless an agreement is in place where the normal pay cycle continues. If this type of agreement is in place, documenting it in either the employment agreement or in writing on a case by case basis is your best option.
With 14 days’ notice, you can require employees to take annual leave over any closedown period. A good example of this is notifying your employees in early December, or even late November, of the need for them to take annual leave over the Christmas period.
There are two instances in which an employee can be forced to take annual leave. If you and your employee cannot agree on when the annual leave is to be taken, and you have given the employee 14 days’ notice, you can force the employee to take holidays. You can also make employees take leave if you regularly close down for a particular period every year, remembering to give 14 days’ notice in this case as well.
An employer may decline a request for annual leave if they have a genuine business reason for doing so. However, they must have considered the request and provide a valid business reason. For example, another employee has already requested leave for this period of time, or it is an exceptionally busy period for the company and annual leave cannot be granted during this period.
The annual leave entitlements outlined above are a minimum and are legislated in the Holidays Act 2003. While an employee cannot receive less than this, employment agreements can increase annual leave entitlements for employees.
Annual leave entitlement is covered in key legislation with specific criteria around how it is implemented, accrued, and used by employees. For advice day and night contact Employsure on 0800 675 700.