Holiday’s Act Taskforce recommendations and what it means for payroll

Anyone with staff knows the frustrations that the complexities of the current Holidays Act legislation creates.  The Government set up a Taskforce to review the Holiday Act in May 2018, which was made up of employer, employee and government representatives.

There was widespread non-compliance with the Holidays Act 2003 and it was generally accepted that this is due to issues with not only the legislation, but the implementing of the legislation into payroll software and the individual business processes that support these.

The Taskforce was required to develop, test and make recommendations to the Government on policy options for the provision of and payment for all holiday and leave entitlements.


Below are some of the key recommendations made by the Taskforce

Annual leave

  • Annual leave entitlement will remain in units of weeks. It will be calculated, taken and paid in weeks or portions of weeks.
  • An employee will become entitled to four weeks’ leave after 12-months’ continuous employment but will have the ability to take leave in advance on a pro-rata basis.
  • If an employee’s days and hours of work are set out in an employment agreement or roster, this would be used as the basis for determining entitlements.
  • If days and hours are not set out in the employment agreement or roster, then the employee’s average hours worked over the previous 13 weeks is used.
  • Annual leave to be paid on the greater of an employee’s Ordinary Leave Pay (OLP – a new leave calculation), Average Weekly Earnings (AWE) in the last 13 weeks and in the last 52 weeks.
  • “Gross earnings” definition to be widened to include all cash payments received, except direct
    reimbursements for costs incurred.
  • FBAPS (family, bereavement, alternative, public and sick) leave entitlement will remain in units of days.
  • Employees can take sick leave and family violence leave in part days, at a minimum unit of ¼ of a day.
  • Bereavement leave and family violence leave is available from the first day of employment.
  • Bereavement leave to cover more family members, including cultural family groups and more modern family structures.
  • Employees to get one day of sick leave entitlement from their first day of employment, with an additional day accrued each month until the full five-day entitlement is reached after four months. The government has also introduced legislation to extend sick leave from five days to 10 days per year.
  • A new test is proposed for determining an “otherwise working day” for FBAPS leave – whether the
    employee was expected to work on the day in question according to a pre-agreed work pattern or
    worked on 50 per cent or more of the corresponding days in either the previous four or 13 weeks.
  • FBAPS leave to be paid at the greater of Ordinary Leave Pay (OLP ) and Average Daily Pay (ADP) over the last 13 weeks.

Other proposals

  • A new four-part test to determine an “intermittent or irregular” working pattern to be eligible to be paid pay-as-you-go (PAYG – leave in each pay) holiday pay. All PAYG employees should be reviewed every 13 weeks to check if they still meet the definition.
  • Removing the ability to pay PAYG for employees on fixed-term contracts of less than 12-months.
  • Remove the requirement to pay 8% of gross earnings and reset the employee’s anniversary
    date for those not entitled to annual leave at the time of a closedown period. Instead, employees can take annual leave in advance.
  • Employers to provide a payslip for every pay period, so employees know what their used and remaining leave entitlements are, and how these were calculated.
  • Enhanced record-keeping requirements will reflect the new calculations for leave transactions and the data used in these calculations.
  • Removing the “parental leave override” to ensure any annual leave earned while on parental leave will be paid at the same rate as other annual leave.
  • On the sale and transfer of a business, employees have the choice about whether to transfer all their leave entitlements to the new employer or have them paid out and reset.


Unfortunately a lot of these changes will not do what was intended, which was to simplify payroll and make it a whole lot easier.  Some of these recommendations may do that, but just the added calculation’s for leave have only added even more complexity to an already fraught situation of calculating leave correctly.

The full report can be found here.  It is important to remember that any changes still need to pass through the full legislative process, which involves public and stakeholder consultation on the proposals. The government has indicated the legislation will be introduced in early 2022.

If you would like to discuss your payroll headaches, feel free to contact the team of experts at Ontrack Bookkeeping.


Content sourced from Datacom 

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