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Annual Leave Changes 2007 - Auckland Chamber of Commerce
Legislation

Legislation covering the change from 3 to 4 weeks a year annual holidays is contained in Schedule 1 of the Holidays Act 2003


Frequently Asked Questions

  • These FAQs were prepared by the Auckland Chamber of Commerce & the employment law team of Hesketh Henry.

  • Disclaimer: These FAQs are intended as a first point of reference and should not be relied on as a substitute for professional advice.Special legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

  • Originally published by the above in PDF format.

  When do I have to pay holiday pay at 8%?
  When is 8% holiday pay calculated from?
  When do I have to provide the 4 weeks annual holiday under the Holidays Act 2003?
  What happens to the accrual for annual leave between 1st April 2006 and 31 March 2007. Does it accrue at 6% or 8%?
  What happens if an employee leaves shortly after 1st April 2007?
  Employment starts on 16th March 2006. What is the leave entitlement and how does that affect the accrual for the 2005/2006 year?
  What if the employee in question 6 resigns on 16 March 2007. How should leave have been accrued? Is the entitlement still 3 weeks?
  Anniversary start date is 1st October. Does entitlement to 4 weeks leave start on 1st April 2007 or does 4 week entitlement not start until 1st October 2007?
  What happens if the employee in question 8 has only taken 1 weeks annual leave between 1st October and 1st April 2007. On April 1st 2007, is the entitlement for that employee 2 weeks or is it 3 weeks?
  Does an employer need to make any preparations for the 8% or 4 weeks on 1st April 2007?
  If I want to make preparations and ensure I have budgeted or accrued for 1st April 2007 when do I start calculating from?

Additional Resources

When do I have to pay holiday pay at 8%?
You only need to pay holiday pay at 8% if an employee leaves employment on or after 1st April 2007.
When is 8% holiday pay calculated from?
The 8% holiday pay is calculated from the employee’s last anniversary date, even if that anniversary falls prior to 1st April 2007.
When do I have to provide the 4 weeks annual holiday under the Holidays Act 2003?
You only need to provide 4 weeks annual holiday under the Act, once the employee has reached his or her anniversary on or after 1st April 2007.
What happens to the accrual for annual leave between 1st April 2006 and 31 March 2007. Does it accrue at 6% or 8%?
Annual leave accrues at 6% during that period.
What happens if an employee leaves shortly after 1st April 2007?
If an employee leaves his or her employment on or after 1st April 2007 then that employee will be entitled to holiday pay calculated at 8% from their last anniversary, even though that anniversary date would fall in the 1st April 2006 to 31st March 2007 period, i.e. the effect is retrospective.
Employment starts on 16th March 2006. What is the leave entitlement and how does that affect the accrual for the 2005/2006 year?
The change from 6% to 8% will have no impact on the 2005/2006 year for this employee.

As at 16th March 2007 this employee will be entitled to the three weeks holiday provided by the Holidays Act 2003.

The employee will then accrue holiday pay at 6% from 16th March 2007 until 31st March 2007.

However, on 1 April 2007 the employee’s accrual from 16 March 2007 will be recalculated at 8%.
What if the employee in question 6 resigns on 16 March 2007. How should leave have been accrued? Is the entitlement still 3 weeks?
The accrual should be 6% and the entitlement is still 3 weeks.
Anniversary start date is 1st October. Does entitlement to 4 weeks leave start on 1st April 2007 or does 4 week entitlement not start until 1st October 2007?
The calculation at 8% do not start until 1st April 2007.

However, this employee’s accrual would have been calculated at 6% from 1st October 2006.

On 1st April 2007 that accrual must be recalculated at 8% from 1st October 2006.

The employee does not have an entitlement to 4 weeks leave until 1st October 2007.

If the employee leaves on 31 March 2007 that employee would only be entitled to holiday pay calculated at 6% from 1st October 2006 but if the same employee leaves on or after 1st April 2007 then that employee would be entitled to holiday pay calculated at 8% from 1st October 2006.
What happens if the employee in question 8 has only taken 1 weeks annual leave between 1st October and 1st April 2007. On April 1st 2007, is the entitlement for that employee 2 weeks (ie. 3 weeks less the one week taken) or is it 3 weeks (ie. the 4 weeks less the one week taken)?
There are two possibilities; either (1) the employee had an entitlement to leave or (2) the leave was taken in advance.

a. If the employee took 1 weeks leave that the employee was already entitled to, i.e. it was leave the employee was entitled to as at 1st October 2006, then taking that leave would make no difference to what occurs on 1st April 2007.

On 1st April 2007 the employee’s holiday pay accrual would change from 6% to 8% for the period from 1st October 2006.

b. However, if the employee had no entitlement to leave and took 1 weeks leave in advance then on 1st April 2007 that employee’s holiday pay accrual would change from 6% to 8% for the period from 1st October 2006 less the amount paid for the one week taken in advance.
Does an employer need to make any preparations for the 8% or 4 weeks on 1st April 2007?
An employer is not required to make any preparations but it is prudent for employers to make some provision for the sudden retrospective effect of annual leave accruals becoming 8% on 1st April 2007.

Employers will need to consider carefully how they make this provision.

Some employers have simply made provision within their budgets and will make an adjustment to payroll for 1st April 2007.

Some payroll systems are able to record the accrual now without allocating that to employees prematurely, i.e. if an employee leaves prior to 31st March 2007 that employee gets paid out at 6% only not 8%.

How employers prepare will need to be considered in relation to their own business and capabilities of their payroll systems.

Employers who make preparations do need to be careful to ensure that leave is not personally allocated to individuals prior to 1st April 2007, otherwise an employer may end up paying out leave that an employee is not entitled to if the employee leaves prior to that date.
If I want to make preparations and ensure I have budgeted or accrued for 1st April 2007 when do I start calculating from?
You only start calculating from each employees anniversary date.

So for the employee in question 8 calculations would only start from 1st October 2006.

However, for the employee in question 6 those calculations would not start until 16th March 2007.

More on processing holiday pays

  52 week history not required   Annual compulsory closedowns
  Holiday pay - daily rates   Changing holiday from 8% each pay
  Using the leave calendar   Termination 8% Part Year Payment
  Employee leave profile   Leave owing report is estimate
  Taxing of holiday pay   Holiday pay miscellaneous
  Alphabetical Index FAQ Questions FAQ Contents Back to top
More on the Holidays Act

  Annual Leave Changes 2007 - Ace Payroll   No penal payments if called back from leave
  Annual Leave Changes 2007 - Auckland Chamber of Commerce   Payments for statutory holidays
  Holiday and leave contents   Holiday pay entitlements
  Holidays Act 2003 full text   Annual compulsory closedowns
  Relevant Daily Pay - Irregular Work Pattern   Holiday pay miscellaneous
  Heinz Wattie day definition   ERS - How is holiday pay worked out?
  Employment Relations Service FAQ's   Taxing of holiday pay
  Employee can go fishing while sick   Public holiday entitlements
  No holiday pay on redundancy   Time Bank
  Annual leave accumulates until taken   How to manually change from 4 to 5 weeks
  Alphabetical Index   Case Law Back to top
More on Public Holidays

  Public Holiday Taken   Christmas New Year
  Public Holiday Worked   Labour Day
  Sick Leave On Public Holiday   Queen's Birthday
  Default Provincial Anniversary   ANZAC Day
  Public Holiday Calendar   Public holiday entitlements
  Easter Holidays   Employment Relations Service FAQ's
  Easter Sunday - Retailers and Retail Workers   Allowing alternative holidays
  Waitangi Day   Time Bank
  Alphabetical Index   Case Law Back to top
Other Leave Sections
  Holidays Act 2003   Public Holiday Worked   Annual Holiday Payments   Time Bank
  Public Holiday Entitlements   Alternative Holidays   Sick Leave   Holiday & Leave Contents
  Public Holiday Taken   Annual Holiday Entitlements   Bereavement Leave  
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Published: 11th June 2006 		Back to top