Change Is Coming - Are You Ready?
On 1 April 2007 employees' paid annual holiday entitlements increase
from a 3 week minimum to a 4 week minimum. Employers need to
be prepared for the change and to budget for its impact.
Current Law
The current law is that after each completed 12 months of continuous
employment an employee is entitled to not less than 3 weeks' paid annual
holidays. If employment ends before further entitlement arises,
then an employer must pay the employee 6% of the employee's gross earnings
since the employee last became entitled to annual holidays. Similarly,
if employment ends within 12 months, then an employer must pay the
employee 6% of the employee's gross earnings since commencement of
employment.
New Law from 1 April 2007
On and from 1 April 2007, when an employee next becomes entitled to
annual holidays, the employee's minimum entitlement is increased from
3 weeks' annual holidays to 4 weeks. If employment ends before
further entitlement arises, then an employer must pay the employee
8% (instead of the previous 6%) of the employee's gross earnings since
the employee last became entitled to annual holidays. Similarly,
if employment ends within 12 months, then an employer must pay the
employee 8% of the employee's gross earnings since commencement of
employment.
Effective Date
Employees become entitled to 4 weeks' annual leave as at their anniversary
date falling on or after 1 April 2007. Employers need to prepare
for the financial impact of the change. Some employers operating
accrual systems have already budgeted for the extra week (i.e. accruing
annual holidays at a rate of 1.66 days each month from an employee's
leave anniversary falling on or after 1 April 2006, giving them 20
days within one year). This way the full 4 weeks is gradually
accrued and available to the employee on their due date.
However, if an employee takes that leave and then resigns before 1
April 2007, they would have taken more paid leave than they were entitled
to. Employers need to remember that 1 April 2007 is the effective
date for the change.
If you have any questions regarding the Holidays Act, or if you
require any assistance, please do not hesitate to contact
us.
For more information, please contact:
Erin Davies
Partner
t: +64 9 979 2177
m: +94 29 622 2300
e: Erin Davies
Last updated: February 2007
This article is intended to be brief in nature and should be used for information only. It should not be relied on as legal advice. |
